Hawkish BOJ expectation from Vanguard
The number of institutions expecting further interest rate increases from the Bank of Japan (BOJ), which could not stop the blood loss in the yen despite moving into the positive interest rate zone in March, is increasing.
Vanguard also joined bond giant Pimco, which diverged from market expectations by expecting three interest rate hikes this year. Ales Koutny, head of Vanguard’s international bond desk, stated that they expect the BOJ policy rate to be increased from the 0-0.1 percent band to 0.75 percent this year.
According to Koutny, the issue that the BOJ should be hawkish this year to protect the yen is underestimated by the markets. Koutny, who gave an interview to Bloomberg, stated that Japanese authorities would be disturbed by the dollar/yen exchange rate level above 155 and said, “We find the markets’ BOJ interest pricing low. Despite all the noise made last week about intervention, we are now above the 155 level again.
“The only way out of this is for Japan to send a very hawkish message,” he said. While the yen lost approximately 9 percent of its value against the dollar this year, the exchange rate was traded at 155.75 in the morning hours.