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Investing.com -- The Bank of Japan is widely expected to maintain its current interest rate at 0.5% at its upcoming meeting. Market attention will focus on the central bank’s forward guidance and the interim review of Japanese government bond purchase operations, according to analysis from ING.
Despite speculation about potential reductions, the Bank of Japan is anticipated to maintain its quarterly bond purchases at the current pace of 400 billion yen rather than cutting to 200 billion yen. The central bank’s decision comes amid ongoing evaluation of Japan’s economic conditions.
Markets currently price in only a 10% chance of a rate hike in July and a 25% chance in September, which ING believes significantly underestimates the likelihood of near-term monetary tightening. The financial institution suggests the risks for tomorrow’s meeting are "skewed to the hawkish side."
The Japanese yen currently represents "a rather attractive hedge," according to ING, particularly if U.S. equities face additional pressure from geopolitical tensions. This assessment comes as investors evaluate various safe-haven assets in the current market environment.
While substantial increases in oil prices could potentially diminish the yen’s appeal as a safe-haven currency, ING believes that a hawkish repricing of Bank of Japan policy expectations would likely offset such effects, maintaining the currency’s attractiveness to investors.
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