ING: Japanese Yen Expected to Remain Weak If Bank of Japan Doesn’t Raise Interest Rates Before December

⑴ Chris Turner of ING Group stated in a report that if the Bank of Japan raises interest rates by 25 basis points to 1.00% on Tuesday and does not hike again until December, the yen is likely to remain weak. He said this would keep Japan's inflation-adjusted real interest rate comfortably in negative territory. ⑵ He noted that if volatility continues to decline this summer and carry trades regain popularity, the yen will continue to serve as a funding currency; in carry trades, investors borrow low-yield currencies to invest in high-yield currencies. ⑶ He said that USD/JPY could break above 160.70 and even risk rising to the 161-162 range, where the Bank of Japan would be more likely to intervene. USD/JPY is flat at 160.28.