(Bloomberg) -- Market analysts view Bank of Japan Governor Kazuo Ueda’s comments at Thursday’s press conference as somewhat hawkish and see the yen as central to timing for an interest rate hike by the BOJ.
The yen strengthened as Ueda spoke, following the central bank’s decision earlier in the day to keep its policy rate unchanged at 0.25%.
Here’s a selection of views:
Support for yen
“Ueda’s comments open a rate hike possibility that will support JPY,“ said Chong Hoon Park, economist at Standard Chartered Bank. “We see the BOJ hiking again in the January 2025 meeting, given the prevailing political uncertainty at home. What could trigger an earlier hike in December is if USD/JPY re-tests the 160-level by year-end, triggering more verbal jawboning and intervention-speak by MOF. For USD/JPY itself, we think the USD side of the equation may matter more ahead of the looming US elections.”
More hawkish than expected
“Ueda-san sounds more hawkish (than markets expected)” but “the dollar-yen cannot go very much lower given you have also to worry about a Donald Trump win next week,” said Hari Hariharan, chief executive officer at NWI Management, a New-York based hedge fund. “If Donald Trump wins and dollar-yen rips higher, the BOJ may have to move in December.”
Jawboning resumes
“It seems that authorities want to stem any risk of pushing into the 154/155” yen per dollar with a series of jawboning, including from the Ministry of Finance earlier this week, rather risk it weakening toward 160, said Tim Riddell, a macro strategist at Westpac Banking Corp. in London
“I suspect markets are very aware of this. US elections and data have been lifting US dollar more broadly, but now pausing, so the timing of such jawboning seems appropriate to create some questioning around month-end positioning after the US dollar rally, especially against the post election softening of yen”
Watch 155 for USD/JPY
“The BOJ is likely to incorporate policy rate expectations through speeches by board members depending on the political atmosphere and FX,” said Shoki Omori, chief desk strategist at Mizuho Securities in Tokyo. “Although they appear to be issuing cautious comments citing FX and overseas economic trends, the market will likely judge that a rate hike in December or January is appropriate, based on their evaluation of domestic data.”
Still, there’s room for USD/JPY to rise should US data including nonfarm payrolls come out strong, with 155 “a level to watch for investors and policy makers,” he said
BOJ eyes on yen
“The renewed weakening in the JPY is clearly factoring into the Board’s deliberations on inflation,” said David Forrester, strategist at Credit Agricole CIB in Singapore. “The affect on the JPY of the slightly lowered inflation forecast for FY25 is offset by BOJ concerns about the weak JPY and its upside risks to inflation.”
Small benefit for stocks
“The BOJ’s cautious approach to policy normalization should be positive at the margin for Japan’s stocks,” said Homin Lee, senior macro strategist at Lombard Odier. “Political uncertainty is modestly negative, but it is not the only factor for the market. We think the underlying fundamentals of the economy will be supportive for stocks in the near-term.”
--With assistance from Mia Glass, Momoka Yokoyama and Michael G. Wilson.
(Updates with fresh comments, earlier version was corrected for yen’s direction)
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