Yen tries to recover after Ueda's statements

The Japanese yen rose in Asian trading on Thursday against a basket of major and minor currencies, attempting to recover from a two-week low versus the US dollar amid renewed buying interest at lower levels, supported by more hawkish comments from Bank of Japan Governor Kazuo Ueda.

Ueda said the central bank will closely examine economic data during its March and April meetings when deciding whether to raise interest rates, leaving the door open for a potential near-term hike.

Price Overview

• Japanese yen exchange rate today: The US dollar fell 0.4% against the yen to 155.75, compared with an opening level of 156.36, after touching an intraday high of 156.37.

• The yen ended Wednesday’s session down 0.3% against the dollar, marking a second consecutive daily loss and reaching a two-week low of 156.82.

• The decline was attributed to the Japanese government’s appointment of two academics viewed as strong advocates of economic stimulus to the central bank’s policy board, fueling concerns about the pace of future rate hikes.

Kazuo Ueda

In an interview with Yomiuri newspaper, Bank of Japan Governor Kazuo Ueda stated that the bank’s baseline stance remains to “continue raising interest rates” if the probability of achieving the bank’s economic, inflation, and price forecasts increases.

Ueda added that the central bank will carefully analyze incoming data during the upcoming March and April monetary policy meetings to determine whether further rate increases are warranted.

He noted that the outcome of this year’s annual wage negotiations could be a decisive factor. If wage hikes come in stronger than expected and prompt companies to raise prices more quickly, the 2% inflation target could be reached sooner than anticipated.

Ueda also said that underlying inflation has not yet sustainably reached the 2% target, but the bank will calibrate policy to ensure the target is achieved without excessive overshooting, emphasizing that the central bank is not “behind the curve” in addressing elevated inflation risks.

Japanese Interest Rates

• Following these comments, market pricing for a 25-basis-point rate hike at the March meeting rose from 3% to 15%.

• Pricing for a similar hike at the April meeting increased from 30% to 45%.

• In the latest Reuters survey, expectations suggest the Bank of Japan could raise rates to 1% by September.

• Investors are now awaiting further data on inflation, unemployment, and wages in Japan to reassess these probabilities.