Reevaluation of the rate in the horizon: BoJ continues to maintain its stance on interest rate hikes

SelfCustodyIssues · 2026-01-15T14:36:04+00:00

In 2025, Bank of Japan signals a shift in monetary policy under Governor Kazuo Ueda, focusing on gradual rate hikes tied to economic conditions. This affects JPY currency markets, with USD/JPY consolidating between 155-158. Pressure on JGB yields may prompt government intervention if the yen depreciates significantly.

SelfCustodyIssues

2026-01-15 14:36:04

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The year 2025 marks a clear signal from the Bank of Japan to the currency markets. Governor Kazuo Ueda, in his first public speech, confirmed the institution’s determination to gradually exit an expansive monetary policy. His message focused on a key condition – the continuation of rate hikes will be contingent upon improvements in economic conditions and inflation trajectory in Japan.

JPY Market Under the Influence of Hawkish Signals

The governor’s comments have impacted investor sentiment. The prospect of reevaluating expectations regarding BoJ rate hikes intensifies in the context of the current USD/JPY level. The currency pair remains in a consolidation range between 155.00 and 158.00, representing a significant resistance for direct intervention.

Ueda emphasized that “an appropriate correction of easing policy will support long-term economic growth when the inflation target is stabilized.” He also added that the moderate wage growth mechanism is likely to persist, suggesting a gradual but consistent increase in interest rates.

Pressure on Bond Yields and Intervention Scenarios

The Japanese government bond market (JGB) remains under significant selling pressure at the longer end of the yield curve. This situation could potentially force the government to support the yen’s exchange rate through direct currency intervention if USD/JPY again approaches last year’s highs at 158.87.

According to MUFG experts, the risk of administrative intervention will increase when the currency pair regains upward momentum. At the same time, the government must demonstrate commitment to fiscal restraint to restore credibility and ease further pressure on yen depreciation against the dollar.

The current USD/JPY consolidation in the 155-158 range thus represents a key turning point for the Japanese establishment – both for the BoJ and the government – in the context of further monetary policy reevaluation scenarios and potential market interventions.

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