USD/JPY: BoJ normalization expectations into April meeting – BBH

Brown Brothers Harriman’s (BBH) Elias Haddad notes USD/JPY is trading just below 160.00 as the Bank of Japan (BoJ) releases new underlying CPI indicators, which remain below the 2% target but are converging toward it. BBH economists expect a 25 bps BoJ hike to 1.00% at the April 28 meeting, with about two-thirds of that move already priced in.

BoJ data backs gradual tightening path

"USD/JPY is firmer just under 160.00. The Bank of Japan (BoJ) published a set of underlying CPI indicators that will be released two business days after the official CPI. Trimmed mean, weighted median, and mode inflation are below the bank’s 2% target."

"While the three measures of CPI excluding institutional factors (like changes to consumption tax) are converging towards 2%. The data is consistent with the BoJ’s gradual normalization path."

"The BoJ’s next policy rate decision is on April 28 and will include the Outlook Report. Our base case is for the BoJ to deliver a 25bps rate hike to 1.00% at that meeting (66% priced-in) given Japan’s positive output gap (0.45% in Q3 2025) and solid results from the latest spring wage talks."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)