BoJ Hawkishness Fails to Boost Yen Amid Priced-In Rate Hike

The recent decline in USD/JPY has stalled despite hawkish comments from Bank of Japan (BoJ) member Kazuyuki Masu. Markets have already priced a 25 bps hike to 1.25% on September 18, but BBH's Elias Haddad sees a 50 bps move as possible given inflation near target and an economy above capacity.

Masu emphasized the need for further rate hikes to normalize monetary policy in Japan, stating that the BoJ needs to raise its policy interest rate 'further, so that it falls solidly within the estimated range of the neutral interest rate.'

Haddad notes that a 50 bps move is not out of the question, considering underlying inflation is close to the 2% target and Japan's economy is running slightly above capacity.