BOJ May Raise Policy Rate Next Week

On June 13, Japanese media reported that the Bank of Japan may raise its policy rate from the current 0.75% to 1.0% during its monetary policy meeting scheduled for June 15-16. Kato, president of the Tokyo Research Institute, believes that the rate hike will put pressure on small and medium-sized enterprises and the lives of ordinary Japanese families, and its impact on the yen's exchange rate remains to be observed. For a long time, the core reason for the yen's depreciation has been the significant interest rate differential between Japan and the U.S., leading to the prevalence of 'yen carry trades' where low-interest yen is used to buy high-yield assets. However, following the announcement of the impending rate hike by the Bank of Japan, there has been no significant appreciation of the yen. Kato believes that the market is concerned that the Bank of Japan's future rate hikes will be slow and lag behind.