The reports over the last week suggested that the BOJ was going to start tapering bond purchases at today’s meeting. Ueda also hinted at that in his speech last week here. That set up market expectations, with the majority anticipating such a move to come this week. But alas, this turns out to be another lesson in conjunction to the Japanese central bank. Things just never are what they seem when it comes to the BOJ.
USD/JPY has risen as a result, with the yen falling across the board. The thinking here is that the BOJ would have began tapering bond purchases before the next rate hike. Now that they did not, where does that leave us?
USD/JPY daily chart
The pair is now breaching the late May high and is looking back towards the 158.00 mark on the day. One would still reasonably assume that Japanese authorities are still keeping a firm line closer to 160.00 for now. But as per intervention efforts in the past, there is a lesson to be heeded.
If the yen-tervention moves are not backed up by BOJ efforts, it tends to garner less respect from markets. That was certainly the case back in October 2022 at the 150.00 level and look at where we are now. So, is the 160.00 level the next example of that? Only time will tell.
In any case, all of this just creates more confusion and uncertainty with regards to the BOJ’s next steps. The timing to hike rates further has closed in on them in the last few months. So, it’s harder to justify that unless the inflation trend turns around again in 2H 2024.
And if they’re not even willing to be bold enough to take a cursory step to tee up such a move, it’s hard to imagine them being much bolder in announcing the next rate hike in July. September next, then?