The Bank of Japan’s Policy Board meeting saw no policy changes, though Board Member Takada advocated for a rate hike to 1.0%. The Outlook Report raised the 2026 growth forecast to 1.0% (from the previous 0.7%).
Governor Ueda’s press conference featured cautious responses throughout, offering no clues about the next monetary policy move. Governor Ueda has two priorities in mind: addressing yen weakness and responding to rising long-term interest rates in Japan. Addressing yen weakness is a longstanding goal, achievable by sending a hawkish message to bring forward market expectations of a July rate hike to April.

Addressing long-term interest rates, however, is more challenging. While a hawkish stance may be effective for long-term rates in terms of curbing future inflation, emphasizing the rate hike path could also create upward pressure on long-term rates by raising expectations for further future increases.

While it seemed the pattern might be to intervene in the currency market after the yen weakened due to a dovish stance, the dollar-yen rate rose to around 159.22 yen after the Bank of Japan Governor’s press conference, only to plummet sharply to around 157.33 yen amid heavy selling. Information circulated suggesting “profit-taking on dollar longs by major players,” but the price movement itself evoked thoughts of “intervention.”

Regarding intervention, both Finance Minister Katayama and Finance Vice-Minister Mimura made statements essentially avoiding direct answers. This appears to be a strategy to fuel market suspicion. We’ll need to wait for the “Implementation Status of Foreign Exchange Intervention” report due at month-end for confirmation, but given the scale, intervention of around ¥1 trillion to ¥1.5 trillion remains a possibility. Considering this a buying opportunity and going long might still be premature.