BoJ Rate Hikes in Focus as Japan's Core CPI Hits 2-Year High

BoJ rate hikes may happen sooner than expected, boosting the yen

Highlights

• BoJ rate hikes may happen sooner than expected, boosting the yen

• Uncertainty constrains equities with Iran strikes in focus

• The soft data continue to be bearish…

• … while recent hard data included a string of downside misses

Key Takeaways

• Bank of Japan Feeling the Inflation Heat: Japan’s core inflation rose to a two-year high in May of +3.7% year-over-year putting prospects of a BoJ rate hike in focus — boosting the woefully undervalued yen in the process while weighing on investor sentiment surrounding large-cap exporters. This was a key thesis behind our recent change in the Rosie Macro Fund to shift our Japanese exposure from stocks to the currency.