JPY: A 155.0 dilemma for Japan ahead of BoJ The Bank of Japan announces monetary policy on Friday and is widely expected to keep rates unchanged after March’s 10bp hike. The market’s focus should therefore be on the BoJ’s quarterly forecast report. Our economics team expects the inflation forecast to be revised upwards, considering the increased inflation in the first quarter, wage growth that exceeded expectations and a weaker yen. PMIs tomorrow and Tokyo’s CPI on Friday are two important releases. All in all, we don’t think the BoJ will push back (implicitly or explicitly) against the current pricing on further hikes. Hawkish bets are – incidentally – not too aggressive, with a total of 21bp priced in by year-end. Instead, we think there is plenty of room for rate hike expectations to rise as the year progresses, and our economists currently expect a 15bp hike in the third quarter and a 25bp hike in the fourth quarter. In the short run, however, the yen remains in a precarious situation. A de-escalation in the Middle East means safe-haven unwinding, leaving JPY under pressure from the structurally higher Treasury yields. We are well into intervention territory, and we’ll see whether Japanese officials draw a line in the sand at 155.0.