Mitsubishi UFJ predicts that there is a possibility that the Bank of Japan will reduce government bond purchases in June

“We expect the Bank of Japan to raise interest rates by 15 bp in July, but it is likely to suggest that in June, the Bank of Japan will gradually begin to reduce the scale of monthly purchases of Japanese government bonds. The Bank of Japan is likely to maintain program flexibility and therefore may not provide numerical guidance on reducing purchases.”

There is a high possibility that the yen will receive “modest support” from this tapering program. However, overseas yields will continue to be a more important factor in yen movements.

“The yen is about to hit bottom, but this depends on the need for other G10 central banks to avoid re-interest rate hikes and whether the Bank of Japan will take such action if wage increases and inflation become more sustainable.”

Analysts believe there is a possibility that Japan will raise interest rates again later this year or in the first quarter of 2025.

In the New York market on Monday, the US dollar/yen fell 0.8% and closed at 156 yen.

While MUFG maintained the Federal Reserve interest rate cut observations in July, it stated that interest rate cuts are “highly uncertain,” and that various conditions are necessary for an appropriate rate cut.