Institution: US/Japan Entering Range-Bound Fluctuation, Only the Bank of Japan May Be Able to Break the Deadlock

Golden Finance reports that on April 22, the US dollar against the Japanese yen remained trapped within the key range of 158.00-160.00. The threat of Japan intervening in FX markets limits upside potential; meanwhile, uncertainty in the Middle East situation, elevated energy prices, and demand for US dollar safe-haven assets constrain downside potential. Only if the Bank of Japan raises interest rates could the yen see a notable rebound, potentially lifting it to around 155 or even higher. If the Bank of Japan unexpectedly takes action at the policy meeting on April 27-28, it would largely suppress the USD/JPY exchange rate and could even push it lower before the upcoming Japan “Golden Week” holiday. However, at present, this scenario seems unlikely. According to data from Totan Research/ICAP, the probability of a rate hike next week has fallen to 9%. The probability of a rate hike in June has risen to 62%. Although the Bank of Japan and the Ministry of Finance have reservations about the inflationary impact that yen weakness could trigger, the market believes that, as concerns about economic growth setbacks remain high, Bank of Japan Governor Ueda Kazuo and most members of the Policy Board are taking a cautious stance on the impact of the Middle East situation on the economy. (Jin10)