Ueda Kazuo refuses to disclose interest rate hike clues as the yen exchange rate continues to languish

According to Zhitong Finance APP, on Monday, Bank of Japan Governor Kazuo Ueda, in an important speech closely watched by global investors, avoided mentioning any sensitive wording regarding a rate hike in December or when future hikes might occur. He emphasized that the timing of any policy adjustment would depend on economic data and refused to provide any clues related to the Bank of Japan's rate hike path. Ueda's dovish remarks this time marked a departure from his previous hawkish statements throughout the year, which aimed to accelerate the pace of rate hikes, leading to further weakening of the yen after his speech, with the dollar rising above the 155 mark against the yen once again.

In his last significant speech before the Bank of Japan's monetary policy meeting on December 18-19, Ueda stated that the timing of the next policy adjustment would depend on economic conditions and prices. He reiterated the Bank of Japan's reliance on economic data and maintained an open attitude towards the specific timing of the next rate hike.

On Monday, Ueda told local business leaders in Nagoya, central Japan: "The actual timing of policy adjustments will continue to depend on the developments in economic activity, prices, and future financial conditions."

Following Ueda's speech, the yen continued to weaken, with the dollar rising 0.5% to 155.14 yen, while the benchmark 10-year Japanese government bond yield slightly fell, as Ueda's latest remarks were much more moderate than some market participants had expected. Overnight index swaps continued to price in the possibility of a rate hike next month, with the likelihood of a rate hike by the Bank of Japan in December at about 54%.

After the Bank of Japan's unexpected rate hike in July triggered severe fluctuations in global financial markets, the central bank's management acknowledged the need to strengthen market communication and expectation management mechanisms. This has led to speculation that Ueda would clarify the Bank of Japan's intentions before the next steps.

"Before Ueda's speech, there was speculation that he would make hawkish remarks, as the yen had depreciated against the dollar to above the 150 yen range, significantly increasing the likelihood of government intervention in the exchange rate," said Jun Taro Morimoto, senior foreign exchange analyst at Sony Financial Group Inc. "If he did not make any hawkish remarks suggesting a possible rate hike at the December meeting, the yen could be further sold off by the market."

Ueda pointed out that the Bank of Japan is moving towards a rate hike and maintains its standard position on this issue. He reiterated that if the Bank of Japan sees a realization of global economic activity, domestic economic growth, wage increases, and price rise prospects, it will continue to pursue raising the policy interest rate.

UBS Securities Chief Japan Economist and former Bank of Japan official Takahide Kiuchi stated: "Ueda is more cautious than expected. The Bank of Japan may believe that with a month until the next meeting, it is too early to make any substantial decisions." But this does not mean that there will be no interest rate hike in December. Officials led by Kazuo Ueda are monitoring various risks while looking for the right timing.

Ueda stated that the Bank of Japan will need to closely watch various risks and potential impacts, including the U.S. economy, while noting that, given the recent positive data, the U.S. economy is more likely to achieve a "soft landing."

After last month's monetary policy meeting, Ueda emphasized that since the risks of a recession in the U.S. economy have largely dissipated, there is no longer a need to consider "timing" before the Bank of Japan makes any monetary policy adjustments.

Regarding Donald Trump's recent victory in the presidential election, Ueda did not disclose specific details and stated that the overall situation of the Trump administration's policies and their impacts will take some time to become clearer.

Currently, he maintains a tone that appears less hawkish yet not dovish, indicating that Ueda refuses to commit to a specific date for the next interest rate hike or provide any clues. This somewhat reflects that after the unexpected rate hike in July, which made the Bank of Japan a "culprit for the global financial market crash in early August," officials at the Bank of Japan have become increasingly cautious.

"As Japan's economic activity, wages, and prices continue to improve, the gradual adjustment of the monetary policy calibration will support long-term economic growth," he stated. This will "help achieve Japan's price stability target in a sustainable and stable manner."