The Bank of Japan will most likely stand pat in it's 17th June meeting. Governor Ueda will not shed any new light on the question of when the BoJ will hike rates again, although he will continue to argue for gradual normalization. The main focus of the June meeting will be the future pace of QT from April 2026. . It is currently reducing Rinban operations by ¥400 bn per quarter. Some say that the BoJ should drop the pace down to, say, ¥200 bn per quarter, because bond yields, especially those at the super long end, are showing signs of stress. But to us it does not matter it does not matter what the BoJ chooses, because the difference is too small against roughly ¥570 tn size of its JGB holdings. Moreover, the new pace is expected to apply only for one year from April 2026 until March 2027. We do not have a strong view on this but we believe BOJ might not change the QT pace. There will be no major changes in the economic and inflation outlook, and we expect that the high level of uncertainty regarding tariff policy will continue to be indicated. But what we do find interesting are the timings of scheduled speeches by the BoJ Policy Board members that have recently been announced. According to the future schedule, Naoki Tamura will give a speech on June 25, and Member Hajime Takata will give a speech on July 3. This is far early than their earlier August schedule. The fact that the speeches by hawkish member Tamura and slightly hawkish member Takata have been moved forward is a tailwind for the July rate hike at least. Hence we are now seeing a 25 bps hike by BOJ in it's 31st July meeting. We remain bullish on JPY and expect to see 135 by Sep end provided US Japan trade talks fruitify. The only risk to our view is the upper house elections in July which hopefully does not lead to a change in the government framework.
