Strategists indicated that the Bank of Japan's decision to maintain its policy rate at 0.75% did not convey a dovish policy signal overall, but rather represented a "hawkish pause based on standing pat." This was particularly evident in the Monetary Policy Committee's 6-3 vote, marking the largest dissent during Governor Kazuo Ueda's tenure. This outcome suggests an increased probability of an interest rate hike in June, subsequently driving the yen higher against the US dollar. Below are the views from various strategists.
Homin Lee, a strategist at Lombard Odier in Singapore, commented, "Unexpectedly dovish signals from Governor Ueda's afternoon press conference could significantly upend market expectations for the yen and complicate coordination with Japan's Ministry of Finance, which might be compelled to intervene in the currency market. Given this morning's decision, we believe the likelihood of Governor Ueda delivering dovish remarks this afternoon is low. We expect the BOJ will utilize signals related to interest rates and Japanese Government Bond purchases in June to manage market expectations."
Moh Siong Sim, FX Strategist at OCBC Bank, pointed out, "Ueda must maintain a hawkish stance. Otherwise, the yen could weaken again, making intervention by the Ministry of Finance the primary support. The BOJ seems to be hinting that it would have raised rates if not for geopolitical tensions. Especially with the easing of US-Iran tensions, a June rate hike appears highly possible."
Masahiro Yamaguchi, Head of Investment Research at SMBC Trust Bank Ltd., stated, "The focus of Ueda's press conference will be his outlook on the economic prospects for June—for instance, whether the BOJ would keep rates unchanged if Middle East tensions persist into June. Looking ahead, the trends of a stronger yen, rising rates, and falling stock prices may soon conclude, with market attention shifting to the FOMC. While equity performance will depend on earnings from major US tech giants, there could be a rotation from AI-related stocks into value stocks like banks."
Tomoaki Kawasaki, Senior Analyst at Iwai Cosmo Securities, said, "The BOJ's belief that inflationary trends will persist supports investor expectations for further rate hikes. Rising bond yields and anticipation of future rate increases serve as a positive catalyst for bank stocks. There is a broad consensus that Japan's economic expansion will continue, and higher interest rates will be beneficial. Setting aside rising oil prices, government spending plans and wage increases are buoying market sentiment for now. This is reflected in the recent stock market rally, and I expect stocks, particularly financials, to continue rising as rate hike expectations strengthen."
Naomi Muguruma, Chief Bond Strategist at Mitsubishi UFJ Morgan Stanley Securities, noted, "Regarding monetary policy management, the phrase 'improvements in the economic and price situation' from the March statement has been removed. That statement had indicated, 'We will continue to increase the policy rate and adjust the degree of monetary easing depending on improvements in the economic and price situation.' Although the BOJ lowered its FY2026 real GDP growth forecast from 1% to 0.5%, if the price outlook—which was revised upward across the board—unfolds as expected, it may signal the BOJ's intention to continue hiking rates even if the economy remains weak."
Rinto Maruyama, Senior FX and Rates Strategist at SMBC Nikko Securities, added, "If Ueda delivers hawkish remarks at the subsequent press conference, the yen is likely to strengthen further. The market had already priced in dissenting votes from members Takata and Tamura, but Nakagawa's dissent was a genuine surprise. Furthermore, the core CPI forecast for 2026 was raised by 0.9 percentage points to 2.8 percentage points compared to the previous projection. Overall, the report's content is hawkish, so the yen's strength is unsurprising. If Ueda opts for a pause this time but clearly signals alignment with such views, the likelihood of a June hike increases, and the yen could have further room to appreciate."
Carol Kong, a strategist at Commonwealth Bank of Australia, wrote, "The divided vote and forecast revisions indicate BOJ officials are more concerned about upside risks to inflation than downside risks to growth. For the yen's rally to continue, Ueda needs to reinforce this shift in sentiment at the press conference and hint that a near-term rate hike is increasingly likely. However, if he remains cautious and provides no clear policy guidance, the market may perceive a June hike as less probable, leading to a yen pullback."
Masahiko Loo, Senior Fixed Income Strategist at State Street Global Advisors, said, "The BOJ's hawkish stance today—with three out of nine board members dissenting—holds significance not only for inflation control but also for defending the yen. This suggests the BOJ's tolerance for further yen depreciation is decreasing as domestic inflation and growth show resilience. Inflation expectations were also revised up significantly, reinforcing our base case that Japan is entering a favorable period driven by robotics, the next wave of AI-driven productivity gains, and fiscal expansion. We maintain our expectation for two BOJ rate hikes in 2026, with June-July being a critical period. From a market perspective, the current situation is neutral to slightly positive for risk assets: Japanese equities should continue to find support, USD/JPY may remain elevated but seems capped near a 'floor' of 162, and the JGB yield curve could maintain its steepness into the first half of 2026."
Hiroshi Namioka, Chief Strategist at T&D Asset Management, noted, "The upward revision to the core CPI forecast excluding energy, combined with the increased number of dissents, effectively signals a potential rate hike in June. They raised their inflation forecasts and still stated that the balance of risks is tilted to the upside, which indeed sounds quite hawkish. The market had been underprepared for a hawkish policy surprise, and a general yen appreciation was anticipated. This might exert some downward pressure on Japanese export-related stocks, causing the Nikkei to hover around the 60,000 level. Nevertheless, depending on Ueda's subsequent comments, equities could still weaken again during the press conference."
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