BlackRock’s Shigekawa Sees Risk to Yen on BOJ Miscommunication

The key market issue is not the policy rate itself but the BOJ's signaling credibility. If the market interprets hesitation as a tolerance for imported inflation and renewed yield suppression, the yen can weaken quickly because positioning is still vulnerable to a confidence shock rather than a gradual macro drift. That creates an asymmetric setup: even a small disappointment on guidance can trigger a larger FX move than the modest carry trade embedded in current positioning.

Second-order effects favor Japanese exporters in the very short run, but the more important winners are hedgers and foreign assets funded in yen. A weaker yen supports overseas earnings translation for large-cap industrials and global tech franchises, yet it also risks importing more inflation into household consumption, which would eventually pressure domestic rate expectations higher and undermine the benefit. In other words, the short-term FX boost can become a medium-term policy tightening catalyst if the BOJ is perceived as behind the curve.

The main catalyst window is the next policy meeting through the subsequent 2-6 weeks, when the market will reprice June hike odds around the BOJ's communication quality rather than the macro data alone. The contrarian view is that geopolitical stress can also work the other way: if risk aversion rises enough, yen-funded carry trades may partially unwind, limiting downside in the currency even if the BOJ underdelivers. That makes the trade less about outright yen collapse and more about timing a repricing in rate differentials and policy credibility.