The Bank of Japan managed to keep financial markets relatively stable following its policy decision, leaving the yen in a narrow range that’s still historically weak.
On Tuesday, the dollar-yen intraday range was just 0.43 yen, the smallest for the final day of a BOJ meeting since January 2021. Yields on Japanese government bonds rose modestly, while the Nikkei 225 briefly topped the 70,000 mark for the first time.
The yen continued to trade past 160 per dollar through Wednesday morning in Tokyo, close to levels that prompted the Ministry of Finance to prop up the currency in late April. With that threshold in mind, investors remain alert to the possibility of another intervention, especially since Finance Minister Satsuki Katayama has repeatedly said her team is ready to step in again whenever necessary.
“Given the continued verbal intervention from MOF officials, many investors remain wary of actual FX intervention risk,” Morgan Stanley MUFG Securities strategists Koichi Sugisaki and Hiromu Uezato wrote in a note. “As a result, we continue to expect USD/JPY to trade in a range.”
While the risk of currency intervention and the Federal Reserve’s pending decision were likely at play, the market stability offers some relief to BOJ officials. The central bank raised its benchmark rate to the highest since 1995 and decided to stop cutting bond buying as widely expected by market participants.
The highlight of the meeting was a press briefing by Deputy Governor Shinichi Uchida, a veteran central banker who was filling in for Governor Kazuo Ueda after the chief was hospitalized last week for treatment of a liver cyst infection. It was the first BOJ meeting since 2010 without the governor in attendance.
Going into the meeting, BOJ watchers were keen to see whether Uchida — who’s widely regarded as one of the architects of the BOJ’s policy framework over the past two decades — would speak more directly than the Ueda, a former professor known for taking a highly nuanced approach.
Uchida caused little surprise with hints of hawkishness in line with the policy statement. The deputy said there is a risk of underlying inflation rising above its 2% target and the bank will continue to raise rates not to fall behind the curve.
“My impression is that he was stable,” said Mari Iwashita, executive rates strategist at Nomura Securities. His comments “confirmed that the BOJ’s policy focus has shifted toward inflation risks. Against that backdrop, the case for continued rate hikes remains intact.”
Marito Ueda, managing director at SBI FX Trade, described Uchida’s press conference as “close to perfect.” The deputy governor struck a balance by acknowledging upside inflation risks while also emphasizing the accommodative monetary environment, Ueda said. Uchida also refrained from giving a clear indication on the possibility of an accelerated pace of interest-rate hikes, Ueda added.
“The person who knows the situation on the ground better than anyone else explained where things stand in logical and concise terms, and answered each question carefully, one by one,” Ueda said.
The yen weakened modestly to 160.35 per dollar after the BOJ statement was released and traded around that level following Uchida’s press briefing. That contrasted with the kind of sharp selloff that some past briefings ignited to prompt the government to intervene in the market.
Following the conclusion of the previous BOJ meeting on April 28, the yen slid after Ueda’s press conference as traders didn’t see his comments as hawkish enough. Two days later, the finance ministry stepped into the market and ended up spending a record ¥11.73 trillion to support the yen over the following month.
With assistance from Takahiko Hyuga and Keiko Ujikane.
This article was generated from an automated news agency feed without modifications to text.
