Bank of Japan Hold Keeps Pressure on the Yen

The Bank of Japan kept its policy rate unchanged at the upper bound of its current corridor, in line with consensus. More importantly, Governor Ueda offered no firm timeline for further hikes, citing the need to assess wage settlements and global trade developments.

Yen reaction

USD/JPY pushed back above 156 in the wake of the decision and has since drifted toward 157. The pair remains highly sensitive to US 10-year yields, with the rolling 30-day correlation now back above 0.7.

Why the BoJ is being patient

• Real wage growth is only just turning positive; the BoJ wants to see this confirmed before tightening further.
• Trade uncertainty with the US remains material, and a stronger yen would hurt exporters at the wrong moment.
• Domestic services inflation is firm but not accelerating, giving the central bank time to wait.

What to watch

The next test is the June meeting. If the BoJ signals a clear path toward another hike before year-end, USD/JPY could correct hard. If not, expect the pair to challenge the 160 level that triggered intervention last year.