BoJ’s Ueda: Would like to leave some scope for adjustment by not pre-committing to a certain policy too much

Source Fxstreet

Bank of Japan (BoJ) Governor Kazuo Ueda commented on the Japanese wage negotiations and their implication on the central bank’s policy this Tuesday.

Key quotes

Annual wage negotiations have been, and always will be, among important economic variables we look at in setting policy.

We decide on policy looking not just at wage talks, but various other economic variables.

We decided to change policy in March because strong wage talk outcome came on top of fairly solid readings in other sectors of economy.

Whether we will set policy with same emphasis on wage talk outcome will depend on conditions at the time.

Hard to say beforehand how long BoJ should wait in gathering enough data to change policy.

We would like to leave some scope for adjustment by not pre-committing to a certain policy too much.

Our basic stance is that we will look at moves in trend inflation to achieve our price goal, and take a data-dependent approach in setting policy.

Market reaction

USD/JPY sticks to lows near 154.70 following these comments, down 0.08% on the day.

Japanese Yen FAQs

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.

The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.

 

Disclaimer: For information purposes only. Past performance is not indicative of future results.
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