BoJ Monetary Policy Meeting Preview

Citi expects a 25bp BoJ rate hike to 1% in June, anticipating semi-annual hikes reaching a 1.5% terminal rate. The report highlights risks regarding JPY weakness, political pressure on the BoJ, and equity market sensitivity.

Key Takeaways

• 1.Citi expects the BoJ to raise its policy rate by 25bp to 1.0% at the June meeting.
• 2.BoJ terminal rate is forecast at 1.5% by June next year, with rate hikes continuing at a semi-annual pace.
• 3.USD/JPY depreciation remains a key risk, with intervention defense lines expected around ¥160/$, though medium-term impact is minimal without pushing it below ¥155/$.

Table of Contents

• Citi's Take
• Japan Economics: 1% still a steppingstone
• Japan Rates: Pricing fair
• Impact of the QT plan likely to be small
• Japan FX: Hindered by institutional design weakness
• Focus on new board member Toichiro Asada
• What will PM Takaichi and Finance Minister Katayama do?
• What is important to the Takaichi government
• US Treasury Secretary Bessent another key player
• Spiral of strength in equities, JPY depreciation, and rising interest rates
• BoJ system design weakness
• Near-term outlook for USDJPY
• Japan Equity Strategy: June BoJ meeting has poor risk/reward profile
• FY3/27 guidance demonstrates corporate earnings resilience
• Near-term risk of revision deterioration exists but is not enough to change the Japanese equity trend
• If our forecast is correct, the June meeting will not be a source of volatility

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