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Jan 14 - 02:55 PM

MUFG: A USD/JPY Surge Post-Inauguration Could Signal BoJ Hike Next Week

By eFXdata  —  Jan 14 - 01:30 PM

Synopsis:

MUFG suggests that a jump in USD/JPY and US yields following tariff announcements after Trump’s inauguration could provide the BoJ with the green light to hike at its January 24 meeting, though clear signals remain elusive.

Key Points:

  1. BoJ Deputy Governor Himino’s Speech:

    • Himino’s comments were cautious, providing no strong signal on the likelihood of a rate hike.
    • He emphasized that any decision would be based on the board's upcoming economic outlook discussions.
  2. Economic Conditions and Hike Justification:

    • Himino expressed optimism about robust wage growth and the US economy.
    • Governor Ueda has previously linked a hike to positive wage trends and clarity on US economic policies.
  3. Market Pricing and BoJ Strategy:

    • Markets currently price a 60% probability of a 25bp hike, reflecting cautious optimism.
    • The BoJ appears to be keeping its options open, allowing USD/JPY and US yield movements post-inauguration to influence its decision.
  4. Potential Catalysts for a Hike:

    • Tariff-related announcements following Trump’s inauguration could drive USD/JPY higher, providing the BoJ with the justification to act.

Conclusion:

While the BoJ remains non-committal, MUFG highlights that USD/JPY movements and US policy clarity post-inauguration may pave the way for a 25bp rate hike at next week’s meeting.

Source:
MUFG Research/Market Commentary

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