BoJ Turns Hawkish Lean: Yen Rises, Nikkei Slips

The Bank of Japan’s recently released June monetary policy meeting minutes revealed hints that some Board members are preparing for the next interest rate hikes—though only if external tensions, particularly with the U.S., begin to ease.

While the central bank held its benchmark rate at 0.5% and slowed the pace of its balance sheet reduction, members emphasized the critical need for flexibility amid ongoing economic uncertainties.

Key Highlights from BoJ’s June Minutes

In the minutes, several BoJ officials noted that inflation and wage growth have exceeded earlier projections, providing a case for policy tightening if those trends are sustained. They also highlighted that the timing of any policy shift would depend heavily on global dynamics—particularly developments in U.S.-Japan relations and broader global trade.

At the same time, concerns over U.S. tariff risks led most members to favor maintaining the current policy stance for now.

Here are some key highlights that were broadly agreed upon by the majority of members:

• Inflation and wage growth have exceeded projections
• BoJ will likely consider resuming rate hikes once trade uncertainty stabilizes
• Uncertainty remains high, but the impact of U.S. tariffs on Japan’s economy may not be as strong as previously projected

BoJ: Leaning Toward a Hawkish Tone

From the June meeting minutes, it’s clear that the Bank of Japan is toning down the perceived impact of U.S. tariff policy. With the U.S.-Japan trade deal essentially finalized, Japan’s economy is now less likely to face strong negative effects from tariffs, said Shawn Lee, Senior Analyst at Ultima Markets.

In the latest July meeting held last week, we also saw a notable tone shift from the BoJ. Governor Ueda described the new U.S.-Japan tariff agreement as a “big step forward” that reduced policy risk and increased confidence in their inflation outlook.

“If the economy and prices move in line with our forecast, we expect to continue raising interest rates and adjust the degree of monetary support accordingly,” Ueda said, signaling a clear change in tone.

While stressing that the BoJ is no longer in a holding pattern, Ueda emphasized that rate hikes would remain data-dependent, focusing on the likelihood of inflation reaching 2%, rather than waiting until it is already achieved.

Market Interpretation & Outlook

Despite the Ueda’s press conference hold a more cautious—but the underlying guidance and tone shift suggest that upcoming future meetings are now “live” for a hike.

Ueda also asserted that the BoJ is not lagging in its response to inflation—even as risk remain balanced amid global uncertainty.

Markets now expect a BoJ rate hike as soon as October after the Ueda comments.

Investors will be watching the upcoming BOJ Summary of Opinions, to be released on August 8, for more nuanced insight into internal deliberations—especially around inflation thresholds and policy timing.

“Should signs emerge of a stronger confidence in Japan’s inflation path and pair with a softening U.S-Japan trade fiction, the case for early rate normalization could strengthen, potentially driving Yen further appreciation.” Said Shawn Lee.

Market Reaction: Yen Strengthen Against Majors, Nikkei Slips

The Japanese Yen extended its gains following the release of the BoJ minutes, adding to last week’s sharp rally. As of this writing, USD/JPY is trading around 147.00.

At the same time, Japan’s equity benchmark—the Nikkei 225—slipped in response to the minutes, reflecting cautious sentiment as investors assess the likelihood of future rate hikes.

Read more on today’s Nikkei 225 technical outlook in our Ultima Technical Analysis section.

USDJPY: 150-Major Psychological level

USD/JPY, Day-Chart | Source: Ultima Markets MT5

Technically, USD/JPY has found strong resistance after briefly spiking above the key 150.00 psychological level, suggesting that Yen buyers are likely stepping in.

Meanwhile, we’ve also seen sharp declines in other Yen crosses, such as EUR/JPY and GBP/JPY, both of which were recently trading near multi-month highs—around ¥170 and ¥195.20, respectively.

GBP/JPY, 4-H Chart | Source: Ultima Market MT5

From a technical perspective, a potential bearish reversal pattern appears to be forming in GBP/JPY, indicating a possible recovery in Yen momentum in the near term.

Disclaimer

Comments, news, research, analysis, price, and all information contained in the article only serve as general information for readers and do not suggest any advice. Ultima Markets has taken reasonable measures to provide up-to-date information, but cannot guarantee accuracy, and may modify without notice. Ultima Markets will not be responsible for any loss incurred due to the application of the information provided.