JPY recoups some losses. Overview for 31.05.2023

The Japanese yen has strengthened markedly against the US dollar. The current USDJPY quote is 139.39.

The JPY rose on news of an emergency meeting of Japanese high-ranking monetary policy officials. The outcome of the meeting was neutral: Japan will watch currency market movements and react if deemed necessary. The monetary policymakers reacted rather due to the surprise effect after the yen had dropped to its lowest levels in six months.

The market consensus is that the Bank of Japan could hike interest rates if certain macroeconomic indices maintain sustainable growth. For example, a steady upward trend in wages could help. Short-term interest rates could be raised as early as the beginning of 2024.

If things develop in this way, companies can be sure that rising prices will not discourage consumers.

Inflation in Japan is not expected to slow down in the future.

This viewpoint is in contrast with that of the BoJ, which believes that the CPI will have dropped below 2% by the end of the year as support from expensive imports will cease.

The question of when the Japanese monetary policy is expected to normalise remains open.