JPY: Bank of Japan Officials Push Back Against Hawkish Market Interpretation

JPY: BoJ officials push back on the market's hawkish interpretation

A media report this morning suggests that Bank of Japan officials saw a discrepancy between what Governor Kazuo Ueda stated in a recent interview about the timing of adjusting monetary policy and what markets interpreted. For some background, we discussed Ueda’s comments in Monday’s FX Daily: he had hinted at earlier-than-anticipated timing (year-end) for the BoJ to have enough evidence on wages to decide on a potential monetary policy shift.

The actual tone of the interview was quite cautious, but a market that has been on its toes for any hawkish sign understandably overreacted to the remarks. USD/JPY is also in the FX intervention area. While the rate of change has probably not been alarming enough to justify Japanese officials to step in, Ueda’s comments did look to us as a “soft” intervention.

Clearly, BoJ members are ready to trade some more yen depreciation for clarity on their stance – and avoid bond market volatility – so the chances of actual FX intervention are rising again, especially given the unlikeliness of an immediate turn lower in the dollar ahead of next week’s FOMC.