USD/JPY breaks through 153! The Bank of Japan's rate hike expectations are heating up. How much longer can the yen continue to rise?

The recent continuous rise in the USD/JPY exchange rate has attracted significant market attention. This is not only due to technical breakthroughs but also because of increasing market expectations of the Bank of Japan’s future interest rate hikes. With multiple policy signals and institutional forecasts emerging, the trend of this currency pair has become a focal point for global investors.

Policy Signals After Japan’s General Election Support Yen Appreciation

Recently, Japan’s political landscape has changed, with the ruling coalition achieving notable results in the election. Subsequently, Japanese government officials stated they would regulate fiscal spending and would not support consumption tax cuts through issuing deficit bonds. This statement effectively eased market concerns about excessive fiscal expansion, creating favorable conditions for yen appreciation.

At the same time, senior officials from Japan’s Ministry of Finance explicitly indicated that they might intervene if there are rapid exchange rate fluctuations deviating from fundamentals, including abnormal movements in USD/JPY. This statement further strengthened market expectations of yen policy support and reflected Japan’s official emphasis on exchange rate stability.

Expectations of Rate Hikes by the Central Bank as a Key Driver for USD/JPY

The latest forecast from U.S. banks indicates that the Bank of Japan will raise interest rates in April by 25 basis points. This expectation is significantly earlier than the previous forecast of a June hike, reflecting strong market anticipation of a policy shift by the BOJ. Rate hikes typically increase a country’s currency attractiveness, so this forecast has directly pushed up the yen’s appreciation pressure against the dollar.

From a technical perspective, the breakthrough of the 153 level in USD/JPY is a direct reflection of this rising expectation. The key point is that if this rate hike expectation materializes, it will further support the yen’s upward momentum.

Divergence Among Institutions on Future Outlook: Where Is the Yen Heading?

However, regarding the future trend of USD/JPY, different investment institutions have already shown clear divergence in their views.

Mizuho Securities holds a bearish stance on the yen, believing that the yen’s depreciation trend will continue. They expect USD/JPY to move within the 160 to 165 yen range, implying further weakening of the yen.

Nomura Securities issued a different warning, suggesting that political changes could trigger a new “trade reset,” leading to market re-sellings of the yen. The firm predicts that once USD/JPY approaches the 160 mark, the risk of Japanese fiscal authorities intervening in the currency market will significantly increase.

In contrast, Deutsche Bank has adjusted its USD/JPY positions to a neutral stance. The bank’s analysis suggests that more favorable policies may be forthcoming, and some previously promised economic stimulus measures could be delayed.

Possibility and Risks of Yen Breaking Through the 150 Level

Based on various viewpoints, there remains significant disagreement about the future direction of USD/JPY. However, some believe that as the April rate hike expectations are gradually confirmed, the probability of the yen breaking through the psychological 150 level is increasing. Nonetheless, policy intervention risks and political uncertainties remain key variables influencing the future performance of USD/JPY. Investors need to closely monitor the Bank of Japan’s policy stance and signals of government intervention to better grasp the future trajectory of this currency pair.