BoJ Summary of Opinions: Policymakers Signal Readiness for Additional Hikes

While the Federal Reserve hits the pause button, the Bank of Japan (BoJ) appears poised to move in the opposite direction. The newly released Summary of Opinions from the December policy meeting reveals a growing consensus among policymakers for further interest rate normalization, providing fundamental support for the Japanese Yen (JPY).

The Hawkish Shift

The summary highlights a critical realization within the BoJ: despite recent hikes taking the policy rate to 0.75% (a 30-year high), real interest rates in Japan remain effectively negative when adjusted for inflation.

Market Impact: USD/JPY

This hawkish tone contrasts sharply with the “waiting game” being played by the Fed and the ECB. This policy divergence—narrowing the yield spread between US Treasuries and Japanese Government Bonds (JGBs)—structurally favors JPY strength.

Traders should watch for the next BoJ meeting; if the data supports the hawkish rhetoric, a break below key support levels in USD/JPY could accelerate as carry trades are unwound.