The Rebound Effort of USD/JPY Hindered by Japan's Hawkish Bias
Summary of Opinion: The Bank of Japan's (BoJ) opinions indicate that many key members advocate for a Japanese interest rate hike as inflation may persist longer or even surpass the target.
The release of the Bank of Japan's Summary of Opinion document this morning revealed the possibility of Japan raising interest rates earlier than previously estimated. This hawkish bias restrained the rise of USD/JPY just below the 156.00 threshold in Thursday's (May 9) trading.
The BoJ's Summary of Opinion shows that many key policy board members are calling for a stable interest rate hike. This is driven by the prospect of long-lasting inflation or even exceeding the central bank's 2% target. One member stated that the BoJ should raise interest rates in a "proper and timely manner" in line with increasing growth and price projections.
On a separate occasion, BoJ Governor Kazuo Ueda outlined the possibility of raising interest rates several times in the coming months. He stated before the Japanese Parliament this morning, "If currency volatility affects, or risks affecting, inflation trends, (then) the BoJ must respond with monetary policy."
Several hawkish signals from the BoJ have successfully countered the recent weakening of the yen — which occurred after the fading impact of Japanese interventions. USD/JPY halted its rebound efforts, while market participants reconsidered the prospects of Japanese interest rate hikes. GBP/JPY and EUR/JPY rallies also slowed down.
Many experts predict that the BoJ will raise interest rates by the end of this year, but there are differing opinions regarding the timing, amount, and frequency. Some also argue that the BoJ will announce an intention to reduce large-scale bond purchases and begin shrinking its balance sheet — a relatively easier monetary policy tightening measure compared to a rate hike.
The release of the Bank of Japan's Summary of Opinion document this morning revealed the possibility of Japan raising interest rates earlier than previously estimated. This hawkish bias restrained the rise of USD/JPY just below the 156.00 threshold in Thursday's (May 9) trading.
The BoJ's Summary of Opinion shows that many key policy board members are calling for a stable interest rate hike. This is driven by the prospect of long-lasting inflation or even exceeding the central bank's 2% target. One member stated that the BoJ should raise interest rates in a "proper and timely manner" in line with increasing growth and price projections.
"If the forecasts shown in our April quarterly report come true, the 2% inflation target will be achieved sustainably and steadily in about two years, and the output gap will turn positive," expressed another member. "Therefore, there is a possibility that our policy interest rates will be higher than current market expectations."
On a separate occasion, BoJ Governor Kazuo Ueda outlined the possibility of raising interest rates several times in the coming months. He stated before the Japanese Parliament this morning, "If currency volatility affects, or risks affecting, inflation trends, (then) the BoJ must respond with monetary policy."
Several hawkish signals from the BoJ have successfully countered the recent weakening of the yen — which occurred after the fading impact of Japanese interventions. USD/JPY halted its rebound efforts, while market participants reconsidered the prospects of Japanese interest rate hikes. GBP/JPY and EUR/JPY rallies also slowed down.
Many experts predict that the BoJ will raise interest rates by the end of this year, but there are differing opinions regarding the timing, amount, and frequency. Some also argue that the BoJ will announce an intention to reduce large-scale bond purchases and begin shrinking its balance sheet — a relatively easier monetary policy tightening measure compared to a rate hike.