Sun, May 19, 2024

JPY: BOJ Governor Signals Rate Hike Potential Due to Yen’s Price Impact

The BoJ Governor Ueda said there will be a rate hikes in the coming months if wage- inflation cycle towards 2% target. We ended massive stimulus programme due to we get confidence in rising inflation rates by House hold spending power. 2 Year JGB Bond yield rise to 0.21% and it is 13 year higher level, So Yen today appreciated after the Ueda Hawkish speech.

USDJPY is moving in box pattern and market has rebounded from the support area of the pattern

USDJPY is moving in box pattern and market has rebounded from the support area of the pattern

Bank of Japan Governor Kazuo Ueda, in an interview reported by the Asahi newspaper, emphasized the likelihood of inflation accelerating from summer to autumn due to significant wage increases, potentially leading to another interest rate hike in the upcoming months.

Ueda also indicated that the central bank stands ready to adjust monetary policy if currency fluctuations significantly impact inflation and wages. He mentioned that sharp declines in the yen could influence the timing of the next rate hike.

Furthermore, Ueda expressed confidence in the potential achievement of the 2 percent inflation target, citing increasing prospects for sustainable and stable inflation. He anticipates inflation to rise as wage hikes enhance household purchasing power, particularly from summer towards autumn.

These hawkish statements resulted in an increase in Japan’s two-year government bond yield to its highest level in 13 years, reflecting market anticipation of a rate hike, possibly as early as July.

Analysts interpreted Ueda’s remarks as signaling a realistic possibility of another rate hike around autumn, with some suggesting a chance of an earlier hike between July and September. However, Ueda emphasized that any decision on rate hikes would depend on data and progress towards achieving the inflation target.

Japanese tall

The Bank of Japan is scheduled to release fresh growth and inflation forecasts in its upcoming meeting in April, with subsequent rate-setting meetings throughout the year.

Despite positive wage outlooks and increasing wage agreements among Japanese firms, mixed economic data and the weakening yen pose challenges to the BOJ’s policy decisions. Ueda hinted that if yen depreciation significantly impacts inflation through higher import costs, it could warrant a response through monetary policy adjustments.

The recent downtrend of the yen, despite the BOJ’s departure from ultra-loose monetary policies, has led authorities to consider intervening in the currency market. The weakening yen poses concerns for policymakers as it raises import costs, potentially impacting households and retailers negatively.

JPY: BOJ Signals Rate Hike, Boosts Yields

The BoJ Governor Ueda said there will be a rate hikes in the coming months if wage- inflation cycle towards 2% target. We ended massive stimulus programme due to we get confidence in rising inflation rates by House hold spending power. 2 Year JGB Bond yield rise to 0.21% and it is 13 year higher level, So Yen today appreciated after the Ueda Hawkish speech.

GBPJPY is moving in Ascending channel and market has reached higher low area of the channel

GBPJPY is moving in Ascending channel and market has reached higher low area of the channel

Bank of Japan Governor Kazuo Ueda, as reported by the Asahi newspaper, provided strong indications that inflation would likely accelerate from summer towards autumn due to significant wage increases, possibly leading to another interest rate hike in the near future.

In the interview, Ueda also emphasized the central bank’s readiness to adjust monetary policy if currency movements significantly impact inflation and wages, suggesting that sharp declines in the yen could influence the timing of the next rate hike.

Ueda highlighted the rationale behind ending the massive stimulus program, citing the nearing prospects of trend inflation approaching the 2 percent target. He expressed confidence in the sustainable and stable achievement of the inflation target, foreseeing increasing likelihood of its attainment.

Furthermore, Ueda explicitly mentioned a timeframe for the expected acceleration of inflation, foreseeing it picking up from summer towards autumn as wage increases translate into enhanced purchasing power for households.

currency graph

The hawkish remarks led to an increase in Japan’s two-year government bond yield to its highest level in 13 years, underlining the BOJ’s conviction that rising wages and inflation justify a potential hike in short-term rates, possibly as early as July.

Analysts interpreted these statements as indicating a realistic possibility of another rate hike around autumn, with some suggesting the possibility of an earlier hike between July and September. However, Ueda emphasized that any decision on rate hikes would depend on data and progress towards achieving the inflation target.

The Bank of Japan is scheduled to release fresh quarterly growth and inflation forecasts in its upcoming meeting in April, with subsequent rate-setting meetings throughout the year.

Despite positive wage outlooks and increasing wage agreements among Japanese firms, mixed economic data and the weakening yen pose challenges to the BOJ’s policy decisions. Ueda hinted that if yen depreciation significantly impacts inflation through higher import costs, it could warrant a response through monetary policy adjustments.

The weakening yen has prompted considerations of intervention in the currency market to stabilize it. A weak yen poses challenges for Japanese policymakers as it inflates import costs, thereby potentially adversely affecting households and retailers.

JPY: BOJ Chief’s Hint Spurs 13-Year High in Japan’s 2-Year Bond Yield

The BoJ Governor Ueda said there will be a rate hikes in the coming months if wage- inflation cycle towards 2% target. We ended massive stimulus programme due to we get confidence in rising inflation rates by House hold spending power. 2 Year JGB Bond yield rise to 0.21% and it is 13 year higher level, So Yen today appreciated after the Ueda Hawkish speech.

EURJPY is moving in Descending channel and market has fallen from the higher high area of the channel

EURJPY is moving in Descending channel and market has fallen from the higher high area of the channel

On Friday, Japan witnessed its two-year government bond yield soaring to its highest mark in 13 years, a surge triggered by the Bank of Japan’s (BOJ) governor hinting at the possibility of another rate hike during an interview with local media outlets.

As reported by the Asahi newspaper, BOJ Governor Kazuo Ueda expressed the central bank’s readiness to take action through monetary policy if declines in the yen start significantly impacting the country’s inflation and wages, a factor that cannot be overlooked.

The two-year Japanese Government Bond (JGB) yield, known for its sensitivity to the BOJ’s policies, climbed by 2 basis points (bps) to 0.21%, reaching its peak level since April 2011. Similarly, the five-year JGB yield experienced a 1.5 bps increase, reaching 0.385%, marking its highest level since March 26.

Naoya Hasegawa, the chief bond strategist at Okasan Securities, attributed the rise in yields to Ueda’s remarks in the newspaper interview. Hasegawa noted the market’s anticipation of a policy rate increase to 0.25% around October, a sentiment reinforced by Ueda’s hints regarding the timing of the rate hike.

forex trader

According to Ueda, inflation is likely to pick up “from summer towards autumn” due to this year’s substantial pay raises resulting from annual wage negotiations.

Last month, the BOJ made significant policy adjustments by ending its negative rate policy and initiating the first rate hike in 17 years. The new policy rate was set as the overnight call rate, with guidance set within the range of 0-0.1%.

Hasegawa from Okasan Securities argued that if the BOJ indeed raises the policy rate to 0.25% within the year, the prevailing two-year JGB yield, trading below 0.2%, would no longer be justifiable.

Meanwhile, longer-dated bonds exhibited stability, with the 10-year JGB yield remaining at 0.775%. The 20-year JGB yield stayed flat at 1.540%, while the 30-year JGB yield remained steady at 1.810%.


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