BoJ’s Takata: Not thinking of raising interest rates one after another
Bank of Japan (BoJ) board member Hajime Takata is back on the writes on Thursday after fanning expectations of a hawkish policy pivot earlier this Thursday.
Additional takeaways
I don't want to single out any policy step when I mention 'nimble responses'.
Not thinking of raising interest rates one after another.
Gradual steps will be needed amid mixed circumstances surrounding small firms.
Various options remain when we dismantle yield curve control framework.
Will not respond automatically to any target, when asked about rate hikes after ending negative rates.
There is no order of steps in monetary policy exit.
We need to keep some easing measures to some extent.
Important to avoid discontinuity, when asked about monetary policy exit.
Monetary policies need to remain consistent with the real economy and financial environment.
Important for exit strategy to be not too complicating.
Market reaction
USD/JPY remains under heavy selling pressure below 150.00, as traders digest the above comments. The pair is down 0.51% on the day.
Japanese Yen FAQs
What key factors drive the Japanese Yen?
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.
How do the decisions of the Bank of Japan impact the Japanese Yen?
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.
How does the differential between Japanese and US bond yields impact the Japanese Yen?
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.
How does broader risk sentiment impact 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.
Author
Dhwani Mehta
FXStreet
Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.
