MUFG Research previews this week's June BoJ meeting.

"The BoJ is expected to raise rates again this week but another Fed rate cut appears unlikely until the end of this year at the earliest. Japanese media reports last week set the stage for the BoJ to hike rates by 25bps this week, and indicated that the BoJ is considering pausing QE tapering from FY2027. A 25bps hike is already fully priced in so is unlikely to trigger a reversal of yen weakness on its own thereby encouraging a further build-up of yen shorts recently. The updated rate guidance is likely to rock the boat either by sticking to a path for further gradual tightening," MUFG notes.

"We expect another hike to be deliver by later this year. One potential source of market volatility will be press conference given that Deputy Governor Uchida will be stepping in for Governor Ueda who is ill. If the yen remains weak, it will keep pressure on Japan to intervene again to provide support. Intervention could prove more effective if energy prices continue to fall and Fed rate hike expectations are pared back," MUFG adds.