The Bank of Japan kept its policy rate unchanged at 0.75%. Governor Ueda did not give clear guidance on whether there will be a rate rise at the June meeting.
Three dissenters initially raised expectations of a June move. The governor said the BoJ would make an “appropriate decision” in June, which reduced market expectations.
Bank Of Japan Signals And June Expectations
TD Securities still expects a June rate rise but with lower confidence. It said a closed Strait of Hormuz could lead the BoJ to pause for longer due to weaker demand risks for Japan’s economy.
The note said the yen has struggled to strengthen, while the BoJ’s stance remains cautious. It warned that renewed US dollar strength linked to risk events, such as strikes on Iran resuming, could lift USD/JPY towards 162, the high seen in July 2024.
Japan’s Golden Week holiday runs from 29 April to 6 May. TD Securities said intervention risk may be higher during this period because the Ministry of Finance has previously acted during thinner liquidity.
The Bank of Japan’s choice to hold rates at 0.75% and the lack of a clear signal for June has left the yen vulnerable. This opens the door for the USD/JPY to continue its upward trend. We believe the central bank may delay any rate hikes, adding further pressure on the currency.
Golden Week Liquidity And Intervention Risk
With the ongoing closure of the Strait of Hormuz threatening Japan’s economy, a test of the 162 level we last saw in July 2024 seems increasingly likely. Tensions flared again over the weekend with reports of another vessel being seized near the Strait, reinforcing this view. This keeps the fundamental pressure on the yen.
As of this morning, with USD/JPY hovering around 161.50, the market is on high alert for official action. One-month implied volatility has surged past 12%, signaling that traders are bracing for a significant price swing. This indicates that options premiums are rising in anticipation of a sharp move.
As we head into Japan’s Golden Week holiday, liquidity will be thin, creating a prime opportunity for intervention from the Ministry of Finance. This environment suggests that long volatility strategies, such as buying straddles or strangles, could be beneficial. These positions profit from a large move in either direction, whether from continued yen weakness or sudden intervention.
We saw this exact playbook back in October 2025 when officials stepped in during a quiet market, causing a rapid 5-yen drop in the pair. Therefore, holding outright short yen positions through options or futures is exceptionally risky. A sudden intervention could erase gains in an instant.
