Citi: Yen weakness may lead the Bank of Japan to raise interest rates three times in 2026

BlockBeats News, January 20 — Hitoshi Hoshino, head of Japan market operations at Citigroup, stated that if the yen continues to weaken, the Bank of Japan may raise interest rates three times this year, doubling the current rate. In an interview, Hoshino said that if the USD/JPY exchange rate breaks above 160, the Bank of Japan might raise the unsecured overnight call rate by 25 basis points in April, to 1%.

He believes that if the yen remains at a low level, there could be a second rate hike of the same magnitude in July, and possibly a third rate hike before the end of the year. “Simply put, the yen’s weakness is driven by negative real interest rates,” Hoshino said. “If the Bank of Japan wants to reverse the exchange rate trend, there is no other choice but to address this issue.” Currently, Hoshino expects the yen to fluctuate within a range slightly below 150 to 165 this year. (Jin10)