Forex Flash: Yen strengthens from BoJ officials at Diet meeting - BTMU

Lee Hardman, FX analyst at the Bank of Tokyo Mitsubishi UFJ notes that the yen has continued to strengthen modestly overnight despite further dovish commentary from the BoJ Deputy Governor candidates at their confirmation hearings before the Diet.

He writes, “Kikuo Iwata reiterated his view that it is important for the BoJ to “expand the monetary base significantly” emphasizing the importance of boosting inflation expectations to defeat deflation. He believes that the BoJ should purchase JGBs with maturities greater than five years. He also noted that the BoJ can achieve their 2.0% inflation target without foreign bond purchases making them not a necessary now, although they should be kept as a policy option for further down the line.”

Hardman comments that when speaking directly about the yen, Iwata stated that a weaker yen helps exporters and will stop companies leaving Japan. He feels that overall, his comments were again largely in line with market expectations. Comments of note from Deputy Governor candidate Nakaso were that the “BoJ may have more room to be creative” while stressing the need to create a “positive cycle” where wages and profits rise.