Citigroup: A weak yen could lead to three interest rate hikes by the Bank of Japan in 2026.

On January 20th, Akira Hoshino, head of Citigroup's Japan market business, stated that if the yen continues to weaken, the Bank of Japan (BOJ) may raise interest rates three times this year, doubling the current rate level. In an interview, Hoshino said that if the USD/JPY exchange rate breaks through 160, the BOJ might raise the unsecured overnight call rate by 25 basis points to 1% in April. He believes that if the yen remains low, a second rate hike of the same magnitude is possible in July, and even a third hike before the end of the year. "Simply put, the yen's weakness is driven by negative real interest rates," Hoshino said. "If (the BOJ) wants to reverse the exchange rate trend, it has no choice but to address this issue." Currently, Hoshino expects the yen to fluctuate within a range slightly below 150 to 165 this year. (Jinshi)