USD/JPY - Yen slides as Ueda says no plans for policy shift
Bank of Japan Governor Ueda spoke at his first news conference as head of the central bank today. It wasn't quite a State of the Union address, but Ueda's message was clear - the current monetary policy was appropriate and he had no plans to make any major shifts.
There has been strong speculation that Ueda will make some significant moves, perhaps not right away but in the next few months. After years of battling deflation, Japan is facing inflation which has risen above the BoJ's 2% target. The US/Japan rate differential has been widening as the Fed continues to raise rates while the BoJ has capped yields on 10-year government bonds and interest rates remain negative.
The changing of the guard at the BoJ seemed to some as an opportunity for BOJ policy makers to take some steps toward normalization, such as tweaking or even removing yield curve control. Ueda poured cold water on this sentiment, stating that, “Right now, the yield curve control is considered most appropriate for the economy while tending to market functionality”. Ueda's message of "stay tuned for more of the same" has lowered expectations of a policy shift at the April 28th meeting and the yen has responded with sharp losses.
Japan's consumer confidence gave policy makers something to cheer about, rising to 33.9 in March, vs. 33.1 prior and 30.9 anticipated. This was the highest level since May 2022, although consumer confidence remains deep in negative territory, below the 50-level which separates contraction from expansion.
The week ended with a solid US employment report. The economy added 236,000 jobs last month, within expectations and softer than the upwardly revised 326,000 reading in February. The labour market is cooling but has been surprisingly resilient to relentless rate hikes and the odds of a 25-bp rate hike have increased to 68% according to the CME Group, compared to around 50% prior to the employment report release.
There is resistance at 133.74 and 135.31
132.18 and 131.67 are providing support
There has been strong speculation that Ueda will make some significant moves, perhaps not right away but in the next few months. After years of battling deflation, Japan is facing inflation which has risen above the BoJ's 2% target. The US/Japan rate differential has been widening as the Fed continues to raise rates while the BoJ has capped yields on 10-year government bonds and interest rates remain negative.
The changing of the guard at the BoJ seemed to some as an opportunity for BOJ policy makers to take some steps toward normalization, such as tweaking or even removing yield curve control. Ueda poured cold water on this sentiment, stating that, “Right now, the yield curve control is considered most appropriate for the economy while tending to market functionality”. Ueda's message of "stay tuned for more of the same" has lowered expectations of a policy shift at the April 28th meeting and the yen has responded with sharp losses.
Japan's consumer confidence gave policy makers something to cheer about, rising to 33.9 in March, vs. 33.1 prior and 30.9 anticipated. This was the highest level since May 2022, although consumer confidence remains deep in negative territory, below the 50-level which separates contraction from expansion.
The week ended with a solid US employment report. The economy added 236,000 jobs last month, within expectations and softer than the upwardly revised 326,000 reading in February. The labour market is cooling but has been surprisingly resilient to relentless rate hikes and the odds of a 25-bp rate hike have increased to 68% according to the CME Group, compared to around 50% prior to the employment report release.
There is resistance at 133.74 and 135.31
132.18 and 131.67 are providing support
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