Japan's December interest rate hike is in doubt again! Ueda Kazuo's latest remarks are not hawkish enough, and the yen fell in response
Ueda Kazuo's speech this time was more moderate than many investors expected in terms of hawkish remarks. He reiterated his stance of maintaining a "data-dependent" approach to monetary policy, stating that the timing of the next policy adjustment will depend on the economic and price conditions in Japan
The Governor of the Bank of Japan speaks cautiously, not clearly hinting at a rate hike in December, leading to a weaker yen.
On Monday, November 18, Bank of Japan Governor Kazuo Ueda delivered his last significant speech before the December rate decision meeting, reiterating his stance of keeping monetary policy "data-dependent," stating that the timing of the next policy adjustment will depend on Japan's economic and price conditions, implying that the Bank of Japan will decide on interest rate hikes based on economic data rather than a fixed timetable. Ueda stated:
“The actual timing of adjustments will continue to depend on the developments in future economic activity, prices, and financial conditions.”
Ueda also mentioned that the Bank of Japan needs to carefully observe various risks, including the economic situation in the United States and its potential impacts. Regarding Trump's potential victory in the presidential election, Ueda did not make specific comments, only stating that it will take some time to clarify the overall picture of Trump's policies and their effects.
Although Ueda's remarks were more dovish than many investors had expected, analysts believe this does not mean the Bank of Japan has already ruled out a rate hike in December. Masamichi Adachi, Chief Japan Economist at UBS Securities and former Bank of Japan official, stated:
“Ueda is more cautious than expected; the Bank of Japan may think there is still a month until the next meeting, and it is too early to make a decision now, but this does not mean there will be no rate hike in December. Ueda is monitoring various risks and looking for the right timing.”
However, Ueda's comments have indeed left the market uncertain about when the Bank of Japan will raise interest rates. As of the time of writing, the dollar against the yen rose 0.1% to 154.52, having previously risen 0.5% to 155.14.
Juntaro Morimoto, Senior Currency Analyst at Sony Financial Group, stated:
“Before Ueda's speech, many speculated that he would make hawkish comments, as the dollar against the yen had already risen above 150. If he does not indicate that the Bank of Japan may further raise rates at the December meeting, the yen may face further selling pressure.”