BoJ tightening looks underpriced as Ueda sticks to hawkish script
Aug 23 (Reuters) -Bank of Japan Governor, Kazuo Ueda, largely stuck to the hawkish script he adopted at last month’s post-decision press conference. Consequently, with Japanese rates pricing in 7bps of easing by year-end 0#BOJWATCH, it does appear that markets may be under-pricing policy tightening from the BoJ, which in turn should bode well for the yen.
Addressing parliament, Ueda noted that there was no change to the bank’s stance and that they would adjust the degree of monetary easing if their price outlook were likely to be achieved, though he did remark that policymakers will watch how market moves affect the economic and price outlook.
In any case, the BoJ Governor reaffirmed the commitment to tighten policy further, showing that he is unperturbed by the volatility in Japanese markets at the beginning of the month.
With a Reuters poll showing that 57% of economists expect the BoJ to raise rates again this year, there is room for a surprise.
In terms of timing of the next move, October is conceivable the next live meeting as September is likely a no-go due to Japan’s LDP presidential election, which will be held on Sept. 27.
For the yen, with the bar low for a hawkish repricing, an appetite to fade pullbacks in the currency is likely to persist.
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(Justin McQueen is a Reuters market analyst. The views expressed are his own.)
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