The Bank of America said that the Japanese authorities may have to continuously interfere in the foreign exchange market to curb the rise of the dollar against the yen.
In the absence of disappointing news about the US economy, if they want the USD/JPY to stay below 155 to buy time before the Bank of Japan raises interest rates, Japan's Ministry of Finance may have to continue to intervene in foreign exchange,” strategists such as Shusuke Yamada and Izumi Devalier wrote in the report.
Analysts expect the Bank of Japan to raise interest rates from the third quarter of 2024.
They wrote that the weak yen might not be enough to change the Bank of Japan's policy, adding that the upward pressure on USD/JPY is likely to continue into the third quarter.
“Hawkish surprises,” such as the Bank of Japan admitting that the policy was too loose, the interest rate hike in June, or the final interest rate higher than market expectations, may be necessary to properly boost the yen.