Japanese Yen Expected to Strengthen as Central Bank Considers Rate Hike

Mizuho's Chief Investment Officer, Shigeki Muramatsu, has indicated that the Japanese yen is likely to strengthen and surpass the 150 mark as the Bank of Japan is expected to raise interest rates in April. According to Jin10, as of the end of September last year, Mizuho managed approximately $512 billion in assets. Muramatsu noted that although there were previous concerns about the current government's ability to facilitate a rate hike by the Bank of Japan, leading to a weaker yen, the situation is now changing. He believes that while the Bank of Japan's policy tightening was previously seen as slow, the likelihood of a rate hike has increased in the context of coordinated actions between the U.S. and Japan. Muramatsu also mentioned that the company currently favors purchasing ultra-long-term Japanese government bonds. He pointed out that the current yields are attractive relative to Japan's growth prospects, particularly the 30-year government bonds, which have stabilized at around 3.64% following last month's bond market turmoil. He believes that unless the government's tax cuts exceed the current "two-year food tax exemption" commitment, the bond market will remain stable. Currently, the 30-year Japanese government bond yield is higher than that of German bonds of the same maturity, despite Japan's lower potential growth rate, further enhancing the appeal of Japanese bonds.