Japan's desired inflation and global geopolitical impact

What happened: Japan's yen has collapsed, pushing USDJPY above 160, as markets anticipate Bank of Japan (BOJ) intervention. The BOJ kept its policy rate steady at 0.75% but raised its inflation forecast due to Iran war-induced supply risks. Core inflation accelerated to 1.8% in March, driven by higher energy prices. ADB President Masato Kanda warned of further yen pressure if the BOJ is seen as slow in addressing inflation. More Japanese firms now oppose rate hikes due to Iran war uncertainties.

Market impact: The yen's collapse and potential BOJ intervention impact currency hedging strategies and Japanese exporters' competitiveness. Higher energy prices drive up input costs for Japanese manufacturers, potentially squeezing profit margins. Firms' reluctance to support rate hikes may limit the BOJ's policy normalization, keeping Japanese government bond yields low and affecting yield curve positioning.

What to watch next: The BOJ's next policy meeting on April 27, where a split vote or hawkish rhetoric could signal a shift in policy. The Tankan survey's April results, due on April 26, may reveal if business optimism holds despite Iran war uncertainties. The yen's technical levels, particularly around 155 and 160, will be crucial in determining market sentiment and potential BOJ intervention.