Citi: Weak Yen May Prompt Bank of Japan to Raise Interest Rates Three Times This Year

Akira Hoshino, Head of Japan Market Operations at Citigroup, stated that if the yen continues to weaken, the Bank of Japan may raise interest rates three times this year, effectively doubling the current rate level. He pointed out that if the USD/JPY exchange rate breaks through 160, the Bank of Japan may raise the unsecured overnight call rate by 25 basis points to 1% in April, and could implement a second and third rate hike in July and before the end of the year, respectively. Hoshino believes that the yen's weakness is driven by negative real interest rates, and if the Bank of Japan wants to reverse the exchange rate trend, it needs to address this issue. He expects the yen to fluctuate within the 150 to 165 range this year.