BoJ’s Uchida: We won't hike rates when markets are unstable

Dhwani Mehta FXStreet

Bank of Japan (BoJ) Deputy Governor Shinichi Uchida expressed his view on the bank’s interest rate outlook, exchange value and the current market volatility.

Key quotes

Our interest rate path will obviously change if, as a result of market volatility, our economic forecasts, view on risks and likelihood of achieving our projection change.

Japan is not in an environment where we would be behind the curve unless we hike rates at set pace.

We won't hike rates when markets are unstable.

Personally believe US economy can achieve soft landing.

See no big change to Japan, US, economic fundamentals so market reaction to single US data appears too big.

Recent market moves are extremely volatile so watching impact of their moves on economy, prices with extreme vigilance, will respond appropriately in guiding policy.

We must maintain current degree of monetary easing for the time being.

Japan's real interest rate very low, monetary conditions very accomodative.

If economy, prices move in line with projections, it is appropriate to adjust degree of monetary easing.

Degree, speed of FX moves' impact on prices bigger than in past.

Weak yen and subsequent rise in import costs pose upside risks to inflation.

Short-term interest rate, at 0.25%, is still very low on real basis, so we continue to support economy with very loose policy.

Given rapid market volatility, we need to maintain current level of monetary easing.

Stock market volatility affects corporate activity, consumption so is important factor in guiding monetary policy.

Reversal of weak Yen means risk of inflation overshoot has diminished, which would affect our policy.

Expect Japan's consumption to stay solid.

Changes seen in Japan's labor market are structural and irreversable.

It is true over 10 years of massive monetary easing has caused various side-effects.

Our scheduled tapering of bond buying likely won't cause major changes in degree of monetary easing.

Short-term rates have bigger effect of stimulating economy than long-term rates.

Market reaction

The Japanese Yen sees a fresh bout of selling following these dovish remarks from the BoJ official, as USD/JPY storms through the roof to retest 147.50. The pair is currently trading at 146.82, still up 1.75% on the day.

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.

USD/JPY eyes August swing low, near 155.20 ahead of US NFP

USD/JPY retests the August monthly swing low during the Asian session on Friday as a more hawkish repricing of BoJ rate-hike bets and a suspected intervention continue to underpin the Japanese Yen. Meanwhile, the US Dollar is seen consolidating the previous day's heavy losses amid soft US bond yields, further weighing on the currency pair as traders keenly await the US NFP report.

AUD/USD consolidates above 0.7200; US NFP awaited

AUD/USD holds steady above 0.7200, near its highest level since mid-May, as bulls await the US NFP report for more cues on the Fed's policy path before placing fresh bets. Meanwhile, the recent decline in US bond yields keeps the US Dollar depressed near its lowest level in over a week and acts as a tailwind for the Aussie amid the RBA's hawkish tilt.

Gold tumbles as blockbuster US NFP lift US Dollar, Treasury yields

Gold (XAU/USD) falls sharply on Friday, snapping a two-day recovery after the US Nonfarm Payrolls (NFP) report surprised strongly to the upside. The metal briefly climbed above $4,500 on Thursday, gaining nearly 2%, but has since erased a large part of that advance.

Crypto’s $638 million buyback boom may not be as bullish as it looks

Decentralized Finance (DeFi) protocols reportedly spent $638 million to buy back their native tokens in August, up 17% from a year earlier. On the surface, the buyback trend suggests the cryptocurrency industry is maturing fast, adopting one of Wall Street’s oldest tools to bolster valuations and distribute revenue. The headline becomes less impressive once the number is opened up.

Why hawkish Bank of Japan expectations aren't enough to sustain the Japanese Yen rally

The Japanese Yen (JPY) experienced a sudden burst higher after falling back below the 160.00 psychological mark against the US Dollar (USD) earlier this week amid a more hawkish repricing of Bank of Japan (BoJ) rate hike expectations.

Diesel’s record $100 warning: The oil shock hiding in plain sight

The Oil market may look calmer than it did a few months ago, but diesel is sending a very different message. The US diesel crack spread, the premium of ultra-low sulphur diesel futures over WTI, recently surged above $100 per barrel for the first time, reaching an intraday record of just over $102.00.