With the yen's decline expected to continue in 2026, experts' analysis of the Bank of Japan's policy and scope for future rate hikes was presented. The article explains the factors behind yen depreciation through the relationship between inflation and real interest rates and explores the direction of future rate hikes.
The view has been expressed that USD/JPY will remain around ¥164 in 2026, with coordinated intervention by Japan and the US also marking a significant threshold. (Background explanation at the beginning of the article)
As Governor Ueda of the Bank of Japan said at a press conference that the policy phase had changed, Sasaki Toru (佐々木 融) of Fukuoka Financial Group analysed that markets expect the current interest rate of 1.25% to be raised to around 2.5%. Based on inflation rates of more than 4% in the past and current real interest-rate conditions, he expressed the view that interest rates need to be brought closer to the inflation rate.
Sasaki pointed out that deeply negative real interest rates cause yen depreciation and explained that raising interest rates could help reverse the yen's decline. He also said that, historically, it has been rare for interest rates to fall substantially below the inflation rate, and expressed the view that there is “room for about another 1%” in the pace of future rate hikes.
The article is for members, and the remaining details have been omitted.