JPY Monthly

The USD/JPY pair hit 40-year highs as Fed rate-hike expectations continue to outperform the Bank of Japan's recent 25bp rate increase. MUFG maintains an upside target of 165 for the pair.

Key Takeaways

• 1.The USD/JPY pair reached its highest level in 40 years, driven by expectations of Federal Reserve rate hikes.
• 2.The Bank of Japan raised its policy rate to 1.00%, but markets remain unconvinced of a sustained tightening cycle, keeping the yen weak.
• 3.Near-term yen weakness is expected due to Japan's trade balance deterioration and potential fiscal stimulus concerns.

Table of Contents

• Summary
• June in review
• Fed rate-hike expectations drive USD/JPY higher
• BOJ decision was not a 'dovish hike'
• Shared concern about falling behind the curve
• Rate hikes are a political decision
• Yen-selling factors stand out in the short term
• Warsh makes hawkish FOMC debut
• Does Warsh himself support rate hikes?
• Pushing back USD/JPY peak
• QUARTERLY FORECAST RANGE AND PERIOD-END FORECAST

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