Japan is rapidly entering stagflation; a yen above 160 could spell serious trouble.
On April 28, the Bank of Japan experienced its deepest rift since 2016—the central bank maintained its policy interest rate at 0.75% by a vote of 6 to 3, while policy board members Hajime Takata, Naoki Tamura, and Junko Nakagawa collectively staged a public "challenge": unanimously proposing to raise rates to 1.0%.
On the same day, the "Outlook Report for Economic Activity and Prices" raised the forecast for core CPI in fiscal year 2026 from 1.9% to 2.8% in one go, and slashed the real GDP forecast for the same period from 1.0% to 0.5%.
On one hand is out-of-control inflation, on the other is collapsing growth—what the textbook calls stagflation, in today's Japan is simply "reality."
Overnight swap markets instantly priced in a 74% probability of the Bank of Japan raising rates by 25 basis points on June 16; the yen is already hovering around the 159 level, just tens of basis points away from the critical 160 "red line."
The pressure cooker inside Japan is about to explode…
Disclaimer: The content of this article solely reflects the author's opinion and does not represent the platform in any capacity. This article is not intended to serve as a reference for making investment decisions.
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