Citi(US:C) Xin Lang Cai Jing·2026-01-20 00:47Core Viewpoint - The Citigroup Japan market head suggests that if the yen continues to weaken, the Bank of Japan may raise interest rates three times this year, potentially doubling the current rate [1][2]. Group 1: Interest Rate Predictions - If the USD/JPY exchange rate exceeds 160, the Bank of Japan may increase rates by 25 basis points to 1% in April, with a similar hike possible in July, and potentially a third increase by year-end if the yen remains weak [1][2]. - Market observers expect the next rate hike from the Bank of Japan may still be months away, but some believe that if the yen declines significantly again, the Bank may act sooner [3]. Group 2: Economic Indicators - Hoshino forecasts that the yen will trade in a range slightly below 150 to 165 this year, with the yen recently trading around 158.2 and having touched an 18-month low of 159.45 [2][3]. - If the 10-year Japanese government bond yield and other key rates rise above inflation, domestic institutional investors may consider repatriating overseas investments to allocate to domestic fixed-income assets [2][3]. Group 3: Market Dynamics - The weakness of the yen is driven by negative real interest rates, where yields are below inflation, indicating that the Bank of Japan has no choice but to address this issue to reverse the currency trend [1][2]. - There is a lack of investment products available for investors wishing to repatriate funds to Japan, which is a key reason for the yen's long-term weakness [4].