Bank of Japan likely to raise rates sharply as yen slides

Mitsubishi UFJ Asset Management chief fund manager Masayuki Koguchi warned on June 5 that the Bank of Japan may need to deliver a larger‑than‑expected rate hike—potentially 50 to 75 basis points in a single meeting—to curb the yen’s decline and ease pressure on Japanese government bonds. The BOJ’s policy rate sits around 0.75%, and market expectations already point to a move toward roughly 1.0% by the end of June, with about 65% of economists forecasting a hike this month.

BOJ Governor Kazuo Ueda’s recent comments were slightly more hawkish, and Reuters reported that a rate increase is expected at the upcoming June meeting unless regional tensions sharply worsen. The yen has largely held steady because the market had priced in a 70‑82% probability of a hike, while the central bank appears to be slowing its bond‑tapering programme, reducing some of the upward pressure on rates.

Analysts note that the USD/JPY pair is edging higher, with technical targets near the 162.00 level. The broader context includes elevated oil prices due to ongoing Middle‑East tensions, which could influence the Fed’s own policy outlook and, in turn, affect the dollar‑yen dynamic.