USD/JPY for 3 months at 146.00 assuming first Fed rate cut in June – Rabobank

USD/JPY rose above the 150.00 level again after the BoJ finally ended its negative interest rate policy. Economists at Rabobank analyze the prospects for this pair.

BoJ’s outlook for interest rate hikes this year remains highly uncertain

The Bank of Japan said in a policy statement today, ‘As can be seen from the results of this year’s spring labor-management wage negotiations, there is a high possibility that wages will continue to rise this year as well.’ This supported the bank’s confidence that the price stability goal was within reach.

Assuming that the strong wage bargaining granted to unionized workers extends to the 70% of non-unionized workers, Japan’s real wage growth could soon rise even higher. Policymakers will hope this will stimulate consumption and, in turn, support business profitability. This means that the BoJ’s virtuous cycle has been completed. So it is possible that the BoJ will raise interest rates again this year, but this outlook is currently highly uncertain.

Our 3-month USD/JPY forecast of 146.00 assumes the first Fed rate cut in June and improvement in Japanese real wages data. Our 12-month USD/JPY target is 140.00.