Japanese Yen Hit by Takaichi Warning
- Written by: Gary Howes
Image © Adobe Stock
Japan's Prime Minister Sanae Takaichi "voiced apprehension over any further rate hikes" in last week's meeting with the head of the Bank of Japan.
Local newspaper the Mainichi cited multiple unnamed sources who confirmed her resistance to further rate hikes. The news wrong-foots a market that is geared for a hike in Japan's base rate to a new 30-year high at 1.0% by June.
The yen fell sharply on the view that Japan's powerful Prime Minister will resist further rate hikes as she tries to ease the cost of living in Japan.
"If that’s a faithful translation, it’s a big deal," says Brent Donnelly, analyst at Spectra Markets. "My bullish JPY view has come undone."
According to the news report, Takaichi adopted "a tougher stance" than during her previous meeting with Bank of Japan governor Ueda in November.
"Tough to stay short USDJPY and indeed I have covered my cash portion here," says a trader at JP Morgan's FX desk.
Donnelly points out that there's additional news to contend with that suggests Japanese authorities were not involved in rate checks on the value of the yen back in January, which would have been a precursor to active currency intervention to boost the value of the currency.
However, we know their American counterparts did so via the New York Federal Reserve.
"News continues to point to the rate check as a rogue and random U.S. action ordered by Scott Bessent with no support from Japan. The idea that Japan might not want a stronger yen is obviously hugely concerning if you’re long yen!" says Donnelly.
The dollar-yen exchange rate rises to 156.31 as it extends its daily gain to 0.90%. The pound to yen rate rises to 210.55.