BOJ must stay accommodative; dollar/yen likely to rise

In the Asian session on Monday (May 22), USD/JPY first rose and then fell, temporarily reporting 137.76, a decrease of 0.11%. Bank of Japan Governor Kazuo Ueda previously said the economy must be supported by maintaining loose monetary policy.

The Bank of Japan’s response to cost-push inflation by tightening monetary policy would hurt the economy. Some analysts say that the yen is the only remaining currency that is suppressed by negative interest rates. The dollar could rise against the yen if the carry trade becomes more popular and the yen is the best bet for funding the carry trade.