Yen Surges on BOJ Rate Hike Expectations 

BOJ Poised for Rate Hike Amid Wage Growth Optimism 

The yen is set for its strongest weekly performance in over a month, driven by growing expectations that the Bank of Japan (BOJ) will raise interest rates next week, pressuring the dollar ahead of Donald Trump’s potential return to the White House. The USD has dropped 1.45% against the Japanese Yen so far for this week. 

(USD/JPY Price Chart, Source: Trading View) 

Market attention has been focused on the BOJ’s stance on wages and inflation, particularly after Governor Kazuo Ueda cited uncertainty over wage growth and domestic inflation as reasons for holding off on rate hikes last month. 

Deputy Governor Ryozo Himino expressed optimism on Tuesday, predicting strong wage growth this year. The following day, Ueda echoed this sentiment, signaling confidence that Japan is making progress toward achieving its inflation target. Both officials indicated the BOJ will debate a rate hike next week, with a strong likelihood of an increase. 

Adding to this momentum, firms are expected to offer significant pay raises for the third consecutive year during upcoming union negotiations in March. Regional BOJ managers have also noted that wage hikes are spreading across companies of all sizes and sectors, fulfilling a key condition for raising rates. 

The BOJ is expected to raise rates to 0.5% next week unless disrupted by external shocks. However, the yen’s strength may be short-lived if Ueda tempers market expectations with dovish remarks following the rate hike. 

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