JPMorgan Chase: The Bank of Japan is still likely to raise interest rates in October, and the yen may rebound

JPMorgan analyst Junya Tanase noted in a research note that recent market cooling of expectations for a Bank of Japan rate hike at this month's meeting may be excessive, potentially resuming the yen's upward trend. While Sanae Takaichi's election as ruling party leader has fueled market expectations for easing policy, the Bank of Japan's policy guidance remains unchanged, and a rate hike on October 30th remains within the realm of possibility. The bank predicts that if the Bank of Japan decides to raise rates next week and its policy communication drives higher terminal interest rate expectations, the USD/JPY exchange rate could fall to 142.00 by year-end (currently trading around 152.60). Tanase added, "If these conditions are not met, an upward revision of USD/JPY exchange rate forecasts may be necessary." (Jinshi)