Mitsubishi UFJ: Japan may need a significant rate hike to boost the yen.

Mitsubishi UFJ Asset Management stated that the possibility of the Bank of Japan raising interest rates significantly or implementing unconventional temporary rate hikes cannot be ruled out. They warned that the expected interest rate hike this month may not be enough to stop the yen and Japanese bonds from weakening further. Masayuki Koguchi, Chief Fund Manager of Mitsubishi UFJ Asset Management, said, "Raising rates by only 25 basis points will not stop the depreciation of the yen. If inflation accelerates, the Bank of Japan may raise rates by 50 to 75 basis points in a single meeting." He added, "Due to changes in the external environment and fundamentals, there is a possibility of the Bank of Japan implementing temporary unconventional rate hikes." Concerns about inflation rising due to the geopolitical tensions in Iran continue to weigh on the yen and Japanese government bonds. Overnight index swaps pricing indicates that the market is betting with over 90% probability on a 25 basis point interest rate hike by the Bank of Japan this month, but Koguchi believes that a small rate hike in one instance may not improve market sentiment.