The Bank of Japan is concerned that the weak yen will result in a renewed acceleration in non-energy goods inflation and we think that the slide of the exchange rate to multi-decade lows this week will convince the Bank to hike its policy rate yet again at its July meeting. However, underlying inflation is now slowing rapidly and we don't think the weaker yen will reverse that trend anytime soon. Accordingly, we think that July's rate hike will be the last in the current cycle.
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