BoJ Normalization Key to Yen Recovery: OCBC Strategists

The Japanese yen's recovery from multi-decade lows hinges on the Bank of Japan accelerating its monetary policy normalization, according to OCBC strategists.

The yen has remained weak against major currencies despite occasional intervention warnings from Japanese authorities. However, verbal intervention alone is insufficient; markets are looking for concrete action from the BoJ, such as adjusting yield curve control or signaling an end to negative interest rates.

As of late 2024, the USD/JPY pair has repeatedly tested levels above 150, a threshold that previously triggered official intervention in 2022. However, the effect of such interventions has historically been short-lived without corresponding monetary tightening.