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ING's Senior Economist Min Joo Kang highlighted that stronger-than-expected Japanese GDP growth and sustained private consumption are reinforcing the Bank of Japan's (BoJ) policy normalization path. While the BoJ has maintained ultra-loose monetary policy for years, recent economic data suggests a potential shift toward tighter conditions. Kang argues that the central bank is more likely to raise interest rates in June 2024 rather than April, as previously anticipated, due to improved economic fundamentals. This development is significant for forex markets, as a BoJ rate hike would increase the Yen's appeal to investors seeking higher yields. The Yen has historically underperformed against major currencies like the USD and EUR due to the BoJ's prolonged stimulus measures. A policy pivot could trigger a reversal in this trend, impacting carry-trade strategies and cross-currency flows. For traders, the focus will shift to BoJ's upcoming monetary policy meetings and inflation data. A June hike would align Japan with global central banks tightening cycles, potentially narrowing the yield gap between the Yen and other major currencies. Investors should monitor Japan's core inflation and employment reports for clues about the BoJ's timeline.
