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Japanese yen weakens as Bank of Japan makes no changes to yield curve range
Morning commuters in front of the Bank of Japan (BOJ) headquarters in Tokyo, Japan, on Monday, Jan. 16, 2023. The Bank of Japan made no changes to its yield curve control policy on Wednesday.
Bloomberg | Bloomberg | Getty Images
The Japanese currency weakened against the U.S. dollar after the Bank of Japan surprised markets by keeping its yield curve tolerance band unchanged.
The Japanese yen weakened 2.6% against the U.S. dollar after the decision was announced and last stood at 131.47, hovering at its strongest levels since June, 2022.
“Japan’s economy is projected to continue growing at a pace above its potential growth rate,” the Bank of Japan said in a statement. The central bank left its interest rate unchanged at an ultra-dovish -0.1% – in line with expectations and maintaining the same rate it’s kept since 2016.
The decision to make no changes to its monetary policies comes after the central bank caught global markets off guard in its previous meeting by widening its tolerance range for the yield on its 10-year government bond from 25 basis points to 50 basis points in December.
Since the move last month, 10-year JGB yields have exceeded the upper ceiling several times.
The yield on the 10-year JGB exceeded the upper ceiling of its band for a fifth straight session on Wednesday morning before dropping to 0.385%.
‘Knee-jerk’ reaction
Nomura head of FX strategy Yujiro Goto said while the move would be a disappointing one for traders bullish on the Japanese yen, the weakening of the currency may be temporary.
“I think the initial reaction [for the yen reaching] 130 to 131, or potentially 132 is a knee-jerk reaction after the ‘no change’ today,” he said on CNBC’s “Street Signs Asia.”
“In the medium term, over the next 2-3 months, I think the trend for the yen should be still on the downside towards 125, even after the disappointment today,” he said,
Goto said the currency will strengthen on hopes of a policy shift in the near-term future, highlighting the nearing end of BOJ Governor Haruhiko Kuroda’s term.
“Markets should keep expecting [the BOJ] to tweak or change [its] monetary policy after some point, especially after Kuroda’s retirement,” he said.
Shigeto Nagai of Oxford Economics said the BOJ’s move to widen its band “fueled” expectations for more changes ahead.
“Today, the BOJ really wanted to calm down that speculation and anticipation for normalization,” he said, adding the central bank will continue to be pressed for change.
More pressure ahead
As inflation continues to rise in Japan, the central bank will face further pressure ahead of its leadership change.
“Inflation in Japan is doing something that it hasn’t done for 40 years,” Viraj Patel of Vanda Research said in a tweet, adding that the Bank of Japan risks “falling into” the same trap as the U.S. Federal Reserve in labeling inflation as “transitory.”
The Bank of Japan used wording that was similar to the Fed’s description of inflation before the U.S. central bank began continuously hiking rates to tame rising prices, describing it as “pass-through.”
“The year-on-year rate of increase in the consumer price index is likely to be relatively high in the short run due to the effects of a pass-through to consumer prices of cost increases led by a rise in import prices,” the central bank said in its latest statement.
The Bank of Japan revised its forecasts for 2023’s core inflation nationwide from 2.9% to 3%. Nationwide inflation data is expected Friday.
Shares rise, yen climbs as BOJ battles bond bears
SYDNEY/LONDON, Jan 16 (Reuters) – Shares firmed on Monday as optimism over corporate earnings and China’s reopening offset concerns the Bank of Japan (BOJ) might temper its super-sized stimulus policy at a pivotal meeting this week, while a holiday in U.S. markets made for thin trading.
The yen climbed to its highest since May after rumours swirled the BOJ might hold an emergency meeting on Monday as it struggles to defend its new yield ceiling in the face of massive selling. read more
That had local markets in an anxious mood, and Japan’s Nikkei (.N225) slipped 1.3% to a two-week low.
Yet MSCI’s broadest index of Asia-Pacific shares outside Japan (.MIAPJ0000PUS) added 0.27%, with hopes for a speedy Chinese reopening giving it a gain of 4.2% last week.
And European shares opened positively with the STOXX 600 (.STOXX) up 0.1% by 0850 GMT driven by healthcare stocks (.SXDP) which gained 0.6%.
Britain’s benchmark FTSE index (.FTSE) edged close to the record high of 7903.50 it hit in 2018, with banks and life insurance companies among the top gainers.
Earnings season gathers steam this week with Goldman Sachs (GS.N), Morgan Stanley (MS.N) and Netflix (NFLX.O) among those reporting.
World leaders, policy makers and top corporate chiefs will be attending the World Economic Forum in Davos, and there are a host of central bankers speaking, including no fewer than nine members of the U.S. Federal Reserve.
The BOJ’s official two-day meeting ends on Wednesday and speculation is rife it will make changes to its yield curve control (YCC) policy given the market has pushed 10-year yields above its new ceiling of 0.5%. read more
The BOJ bought almost 5 trillion yen ($39.12 billion) of bonds on Friday in its largest daily operation on record, yet 10-year yields still ended the session up at 0.51%.
Early on Monday, the bank offered to buy another 1.3 trillion yen of JGBs, but the yield stuck at 0.51%.
“There is still some possibility that market pressure will force the BOJ to further adjust or exit the YCC,” JPMorgan analysts said in a note. “We can’t ignore this possibility, but at this stage we do not consider it a main scenario.”
“Although domestic demand has started to recover and inflation continues to rise, the economy is not heating up to the extent that a sharp rise in interest rates and potential risk of large yen appreciation can be tolerated,” they added.
THE YEN UN-ANCHORED
The BOJ’s uber-easy policy has acted as a sort of anchor for yields globally, while dragging down the yen. Were it to abandon the policy, it would put upward pressure on yields across developed markets and most likely see the yen surge.
The dollar has been undermined by falling U.S. bond yields as investors wager the Federal Reserve can be less aggressive in raising rates given inflation has clearly turned the corner.
The Japanese yen rose to a more than seven-month peak against the dollar on Monday, as market sentiment was dominated by expectations that the BOJ would make further tweaks to, or fully abandon, its yield control policy.
The yen jumped roughly 0.5% to a high of 127.215 per dollar, before easing to 128.6 by 0915 GMT.
The dollar index, which measures the U.S. unit against a basket of major currencies, recovered from a 7-month low touched earlier in the session to be at 102.6 .
Futures now imply almost no chance the Fed will raise rates by half a point in February, with a quarter-point move seen as a 94% probability.
Yields on 10-year Treasuries are down at 3.498%, having fallen 6 basis points last week, close to its December trough, and major chart target of 3.402%.
Alan Ruskin, global head of G10 FX Strategy at Deutsche Securities, said the loosening of global supply bottlenecks in recent months was proving to be a disinflationary shock, which increases the chance of a soft landing for the U.S. economy.
“The lower inflation itself encourages a soft landing through real wage gains, by allowing the Fed to more readily pause and encouraging a better behaved bond market, with favourable spillovers to financial conditions,” Ruskin said.
“A soft landing also reduces the tail risk of much higher U.S. rates, and this reduced risk premia helps global risk appetite,” Ruskin added.
Commodities prices which had rallied last week, dipped on Monday.
The drop in yields and the dollar had benefited the gold price, which jumped 2.9% last week, but the precious metal slipped 0.4% to $1,911 an ounce in early trading on Monday .
Oil prices slid as a rise in COVID cases clouded the prospects for a surge in demand as China reopens its economy.
Brent crude fell 73 cents, or 0.83%, to $84.57 a barrel by 0857 GMT, while U.S. West Texas Intermediate crude CLc1 was down 61 cents, or 0.6%, at $79.24 a barrel.
($1 = 127.8000 yen)
Reporting by Wayne Cole and Lawrence White;
Editing by Shri Navaratnam and Emelia Sithole-Matarise
Our Standards: The Thomson Reuters Trust Principles.
Japanese government offers families 1m yen a child to leave Tokyo | Japan
Japan’s government is offering 1m yen ($7,500) per child to families who move out of greater Tokyo, in an attempt to reverse population decline in the regions.
The incentive – a dramatic rise from the previous relocation fee of 300,000 yen – will be introduced in April, according to Japanese media reports, as part of an official push to breathe life into declining towns and villages.
Although Tokyo’s population fell for the first time last year– a trend partly attributed to the coronavirus pandemic – policymakers believe more should be done to lower the city’s population density and encourage people to start new lives in “unfashionable” parts of the country that have been hit by ageing, shrinking populations and the migration of younger people to Tokyo, Osaka and other big cities.
The payment – which comes on top of up to 3m yen already available in financial support – will be offered to families living in the 23 “core” wards of Tokyo, other parts of the metropolitan area and the neighbouring commuter-belt prefectures of Saitama, Chiba and Kanagawa.
To receive the benefits, families must move outside the greater Tokyo area, although some could receive the cash if they relocate to mountainous areas that lie within the city’s boundaries, the Kyodo news agency said, quoting officials.
About 1,300 municipalities – roughly 80% of the total – have joined the scheme, hoping to capitalise in a shift in public attitudes towards quality of life that gained momentum during the pandemic, when more workers discovered the benefits of working remotely.
Families hoping to secure an easy payday before returning to the capital will be disappointed, however. They must live in their new homes for at least five years and one member of the household must be in work or plan to open a new business. Those who move out before five years have passed will have to return the cash.
Officials hope the generous sums on offer will encourage families with children aged up to 18 to revitalise regions and ease pressure on space and public services in greater Tokyo, the world’s biggest metropolis with a population of about 35 million.
In principle, relocating families receive 1m-3m yen per household provided they meet one of three criteria: employment at a small or midsize company in the area they move to; continuing in their old jobs via remote working; or starting a business in their new home, according to the Nikkei business newspaper. After the higher payments are factored in, a family with two children could be eligible for up to 5m yen.
Half of the cash will come from the central government, and the other half from local municipalities, Kyodo said.
The scheme has struggled to capture the public imagination since it was launched three years go, with support provided to 1,184 families in 2021 – the year teleworking became more common – compared with 71 in 2019 and 290 in 2020, the Nikkei said.
The government is hoping 10,000 people will have moved from Tokyo to rural areas by 2027, it added.
To attract new residents, Japan’s hollowed-out towns and villages have highlighted the charms of rural life, easy access to undersubscribed childcare and, in the case of Otari village in Nagano prefecture, the availability of eligible men.
The latest attempt to reinvigorate the regions comes amid yet another drop in Japan’s population.
The population of the world’s third-biggest economy suffered a record fall of 644,000 in 2020-21, according to government data. It is expected to plummet from its current 125 million to an estimated 88 million in 2065 – a 30% decline in 45 years.
While the number of over-65s continues to grow, the birthrate remains stubbornly low at 1.3 children– well below the 2.1 needed to sustain the current population size.
In 2021, the number of births totalled 811,604, the lowest since records were first kept in 1899. By contrast, the number of centenarians stands at more than 90,500 – compared with only 153 in 1963.
Bank of Japan Lets a Benchmark Rate Rise, Causing Yen to Surge
TOKYO—The Bank of Japan made a surprise decision to let a benchmark interest rate rise to 0.5% from 0.25%, pushing the yen higher and ending a long period in which it was the only major central bank not to increase rates.
The
BOJ
said the yield on the 10-year Japanese government bond could rise as high as 0.5% from a previous cap of 0.25%. The central bank has set a target range around zero for the benchmark government bond yield since 2016 and used that as a tool to keep overall market interest rates low.
The 10-year yield, which had been stuck around 0.25% for months because of the central bank cap, quickly moved up to 0.46% in afternoon trading.
The yen rose in tandem. In Tuesday afternoon trading in Tokyo, one dollar bought between 133 and 134 yen, compared with more than 137 yen before the BOJ’s decision.
The Nikkei Stock Average, which had been slightly higher in the morning, was down more than 2% as investors digested the possibility that companies would have to pay higher interest on their debt. Also, the weak yen has pushed up profits for many exporters, so a stronger yen could be negative for stocks.
Gov.
Haruhiko Kuroda,
who is nearing the end of 10 years in office, is known for making moves that surprise the market, although he had made fewer of them in recent years.
Market players had anticipated that time might be running out on the Bank of Japan’s low-rate policy, but they generally didn’t expect Mr. Kuroda to move at the year’s final policy meeting.
The Bank of Japan’s statement on its decision Tuesday didn’t mention inflation as a reason to let the yield on government bonds rise as high as 0.5%. Instead, it cited the deteriorating functioning of the government bond market and discrepancies between the 10-year government bond yield and the yield on bonds with other maturities.
The bank said Tuesday’s move would “facilitate the transmission of monetary-easing effects,” suggesting it didn’t want the decision to be interpreted as monetary tightening.
The move is “a small step toward an exit” from monetary easing, said
Mitsubishi UFJ Morgan Stanley Securities
strategist Naomi Muguruma.
Ms. Muguruma said the BOJ needed to narrow the gap between its cap on the 10-year yield and where the yield would stand if market forces were given full rein.
“Otherwise magma for higher yields could build up, causing the yield to rise sharply when the BOJ actually unwinds easing,” she said.
Japan’s interest rates are still low compared with the U.S. and Europe, largely because its inflation rate hasn’t risen as fast. The Federal Reserve last week raised its benchmark federal-funds rate to a range between 4.25% and 4.5%—a 15-year high—while the European Central Bank said it would raise its key rate to 2% from 1.5%.
In the U.S., inflation has started to slow down recently but is still running above 7%. In Japan, consumer prices in October were 3.7% higher than they were a year earlier.
Japan has seen prices rise like other countries, owing to the impact of the war in Ukraine as well as the yen’s weakness. However, the pace of inflation is milder in Japan, where consumers tend to be highly price sensitive.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
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Japanese yen strengthens as central bank widens yield target range, Asia markets fall
Bank of Japan holds rates steady, widens yield curve control band
The Bank of Japan held its benchmark interest rates steady and announced it will modify its yield curve control band, the central bank said in a statement.
The BOJ will expand the range of 10-year Japan government bond yield fluctuations from its current plus and minus 0.25 percentage points to plus and minus 0.5 percentage points, it said.
The adjustment is intended to “improve market functioning and encourage a smoother formation of the entire yield curve, while maintaining accommodative financial conditions,” the BOJ said.
The Japanese yen strengthened nearly 2% to stand at 134.33 against the U.S. dollar shortly after the announcement.
– Jihye Lee
Reserve Bank of Australia minutes show range of options were considered in December
Minutes from the Reserve Bank of Australia’s December meeting showed that the central bank had considered a number of options for its cash rate decision, including a complete pause in hikes.
“The Board considered several options for the cash rate decision at the December meeting: a 50 basis point increase; a 25 basis point increase; or no change in the cash rate,” the minutes said.
RBA board members also noted the importance of “acting consistently,” adding that the central bank will continue to consider a range of options for the upcoming year as well.
– Jihye Lee
China keeps key lending rates unchanged
The People’s Bank of China kept its one-year and five-year loan prime rates unchanged in December, according to an announcement.
The central bank maintained its one-year loan prime rate at 3.65% and its five-year loan prime rate at 4.30%, in line with expectations in a Reuters poll.
The offshore and onshore Chinese yuan were relatively flat at 6.9808 and 6.9783 against the U.S. dollar, respectively.
– Jihye Lee
CNBC Pro: Is China set for a rebound in 2023? Wall Street pros weigh in — and reveal how to trade it
What’s next for China after it rolled back a slew of Covid-19 measures?
Market pros weigh in on the prospect of a rebound in the world’s second-largest economy and reveal opportunities for investors.
CNBC Pro subscribers can read more here.
— Zavier Ong
Bank of Japan expected to hold rates steady
The Bank of Japan is expected to keep its interest rates steady at -0.10%, according to survey of economists by Reuters.
The rate decision is expected after the central bank’s two-day monetary policy concludes Tuesday.
Separately, Japan’s government and the BOJ are reportedly aiming revise a statement committing to a 2% inflation target at the earliest possible date, according to Kyodo News, citing government sources.
— Jihye Lee
The Fed is overdoing rate hikes, Evercore ISI says
The Federal Reserve is likely overdoing it’s rate hikes to tame inflation and could end up tipping the U.S. economy into a recession, Ed Hyman of Evercore ISI wrote in a Sunday note.
The Federal Funds rate is now 6.5% versus a core PCE of 4.7% on the year and bond yields at 3.5%, Hyman wrote.
“And it’s not just the Fed tightening: ECB, BoE, Mexico, Switzerland, and Norway also tightened last week,” he said. “Perhaps more profoundly, the money supply is contracting.”
In addition, Evercore’s economic diffusion index is approaching recession territory along with other indicators such as company surveys, inflation data and layoff announcements. And, wage gains have started to slow and high rents are showing early signs of easing, signaling that inflation has likely run its course.
“In any event, 87 percent of American voters are concerned about a recession,” said Hyman.
—Carmen Reinicke
S&P 500 headed for worst December in four years
The S&P 500 has dropped more than 6% this month, as Wall Street struggles heading into year-end. That puts in on track for its worst monthly performance since September. It would also be its biggest December decline since 2018, when it slid 9.18%.
Stocks close lower for fourth day in a row
Recession fears and dashed hopes of a year-end rally weighed on stocks Monday, sending them to the fourth consecutive negative close.
The Dow Jones Industrial Average shed 163.85 points, or 0.50%, to close at 32,756.61. The S&P 500 fell 0.91% to 3,817.47, and the Nasdaq Composite shed 1.49%to 10,546.03 weighed down by shares of Amazon, which slipped 3%.
—Carmen Reinicke
Dollar shrugs off suspected yen intervention, Europe clings to Fed hopes
LONDON/SYDNEY, Oct 24 (Reuters) – The dollar weathered another suspected blast of Japanese intervention to rise against the yen on Monday, while European markets got a lift from hopes that U.S. interest rates could rise more slowly than previously thought.
The dollar roared to 149.70 yen in early trade before hastily retreating to 145.28 in a matter of minutes in what traders and analysts said appeared to be at the hands of the Bank of Japan. It was last down almost 1% at 149.24.
The Financial Times reported the BOJ may have sold at least $30 billion on Friday to try to protect the yen from yet more weakness, which has sharply lifted the cost of Japan’s imports, particularly for resources.
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Japanese authorities again declined to confirm whether they had intervened, but the price action suggested they had.
Any action to support the yen runs counter to the BOJ’s commitment to controlling Japanese government borrowing costs and could increase the pressure on it to step back on yield curve control at its policy meeting this week.
Sterling, meanwhile, see-sawed in volatile trade on news Boris Johnson had dropped out of the running for British prime minister.
Former finance minister Rishi Sunak, who is the market’s preferred candidate, has emerged as the front-runner for the job, which could reduce some of the political uncertainty hanging over the pound.
The news initially saw sterling jump almost a cent to $1.1402, but it could not hold and was last trading at $1.1328 as investors waited for more clarity on the contest. The leadership could potentially be settled later on Monday if Sunak becomes the only candidate to secure the minimum number of MPs’ votes required to progress.
“The day-to-day is tricky. My favourite expression on all of it this morning is this is a time to be a poker player, not a chess player. It’s all about positioning and sentiment and understanding who you’re playing against,” Societe Generale strategist Kit Juckes said.
Equities mostly extended the bounce that began late in New York on Friday on talk the Federal Reserve was debating when to slow the pace of hikes and might signal a step back at its November meeting.
Markets are still priced for a rise of 75 basis points next month, but have scaled back bets on a matching move in December. The peak for rates has also edged down to around 4.87%, from above 5% early last week.
ECB, BoC SET TO HIKE
Stocks in Europe opened on an upbeat note, with the STOXX 600 up 0.7% on the day, ahead of a week of packed earnings, as 118 companies, including big guns like HSBC (HSBA.L), Unilever (ULVR.L) and TotalEnergies (TTEF.PA) are set to report.
Chinese blue chips (.CSI300) slid almost 3%, while the offshore yuan hit another record low against the dollar after Xi Jinping secured a precedent-breaking third leadership term, picking a top governing body stacked with loyalists. Xi is likely to stick to his zero-COVID policy that is damaging growth, analysts say.
Delayed data on gross domestic product(GDP) showed the Chinese economy grew 3.9% in the third quarter, above forecasts for 3.5%, but retail sales disappointed, with a rise of 2.5%.
Markets now await figures on U.S. GDP due on Thursday and core inflation measures the day after. The economy is forecast to have grown an annualised 2.1% in the third quarter, while the Atlanta Fed GDP Now indicator rose to 2.9% in the latest week, from 2.8%.
Sentiment will also be tested by some major earnings with Apple (AAPL.O), Microsoft (MSFT.O), Google-parent Alphabet (GOOGL.O) and Amazon (AMZN.O) all reporting.
The European Central Bank meets this week and is widely expected to raise its rates by 75 basis points, though it is less clear whether it will signal a further such move in December.
“Although we do not expect any ‘dovish’ policy signal, we maintain a bias towards a lower rate path than currently priced by markets,” said analysts at NatWest Markets in a note.
“We forecast +50bp in December and +25bp in early 2023 to a 2.25% peak,” they added. “There is more uncertainty around QT (quantitative tightening), where beginning sales in Q1 2023 could well be announced.”
The euro was off a fraction at $0.9835 , having briefly been as high as $0.9899 early in the session.
The Bank of Canada is also expected to tighten by 75 basis pointsat its meeting this week.
The possibility of a slowdown in U.S. rate increases helped bonds pare some of their recent heavy losses, with U.S. 10-year Treasury yields easing to 4.16% compared to a 15-year peak of 4.337% on Friday.
In commodity markets, gold was sidelined at $1,654 an ounce .
Oil prices surrendered early gains following soft data on Chinese demand. Brent retreated 42 cents to $93.08 a barrel, while U.S. crude fell 41 cents to $84.64.
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Reporting by Wayne Cole; Editing by Jacqueline Wong, Christopher Cushing and Susan Fenton
Our Standards: The Thomson Reuters Trust Principles.
Japan’s suspected FX intervention fails to stem yen slide
TOKYO, Oct 24 (Reuters) – Japanese policymakers on Monday continued efforts to tame sharp yen falls, including through two straight market days of suspected intervention, but ultimately failed to prop up the currency against persistent dollar strength.
The yen’s sell-off is hurting the world’s third-largest economy by driving already surging import bills and challenges the Bank of Japan’s commitment to ultra-low rates in the face of rapid global monetary tightening to combat rampant inflation.
The Japanese currency jumped 4 yen to 145.28 per dollar in early Asia trade on Monday, suggesting authorities had stepped in for a second straight day after a similar move by Tokyo on Friday.
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“We won’t comment,” Masato Kanda, vice finance minister for international affairs, told reporters at the Ministry of Finance (MOF), when asked if they intervened again on Monday.
“We are monitoring the market 24/7 while taking appropriate responses. We’ll continue to do so from now on as well,” said Kanda, who oversees Japan’s exchange-rate policy.
However, the yen failed to cling to early gains and briefly hit a low of 149.70 per dollar, as markets continued to focus on the widening divergence between the Bank of Japan’s ultra-easy monetary policy and steady rate hike plans by the U.S. Federal Reserve. It last stood around 148.80.
“In the past crises involving British pound and Italy’s lira, authorities have ended up failing to defend their currencies. Likewise, Japan’s stealth intervention only has limited effects,” said Daisaku Ueno, chief FX strategist at Mitsubishi UFJ Morgan Stanley Securities.
“Strength in the dollar is the biggest factor behind the weak yen. If the United States shows signs of its rate hikes peaking out and even cutting interest rates, the yen would stop weakening even without intervention.”
BOJ’s BIND
The yen’s plight puts the BOJ under the spotlight as it meets for a two-day rate meeting ending on Friday, when it is widely expected to maintain ultra-loose monetary policy.
With inflation relatively modest and the economy unable to move into a faster gear, the central bank is wary of raising rates and risk triggering a recession.
“It’s extremely undesirable” that Japan’s real wages, adjusted for inflation continue to fall, BOJ Governor Haruhiko Kuroda told parliament on Monday.
“It’s desirable for inflation to stably achieve our 2% target accompanied by wage rises,” Kuroda said, stressing the need to keep supporting the economy with ultra-low rates.
The Fed, which meets the following week, is widely expected to hike rates again as it focuses on fighting red-hot inflation.
The widening U.S.-Japanese rate differential is likely to keep downward pressure on the yen, which has fallen more than 20% against the dollar this year.
Japanese authorities confirmed that they stepped into the market when it intervened on Sept. 22, spending 2.8 trillion yen ($18.80 billion) to prop up the yen for the first time since 1998.
Since then, authorities have remained silent on whether they made any further attempts to support the currency including on Friday, when Tokyo likely conducted stealth intervention.
At $1.33 trillion, Japan’s foreign reserves provide it with enough fire power to intervene many more times, but traders doubt that Tokyo will be able to reverse the yen’s downtrend on its own.
Finance Minister Shunichi Suzuki repeated that excessive currency moves were undesirable.
“We absolutely cannot tolerate excessive moves in the foreign exchange market based on speculation,” he told reporters at the finance ministry. “We will respond appropriately to excess volatility,” he said, a view echoed by Prime Minister Fumio Kishida in parliament later on Monday.
($1 = 148.9000 yen)
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Reporting by Tetsushi Kajimoto and Yoshifumi Takemoto; Additional reporting by Chang-Ran Kim, Sakura Murakami and Leika Kihara; Editing by Shri Navaratnam and Sam Holmes
Our Standards: The Thomson Reuters Trust Principles.
Hang Seng index down 5%, yen at 148-levels
People wearing face masks walks in front of the Hong Kong skyline on October 17, 2022 in Hong Kong, China.
Vernon Yuen | Nurphoto | Getty Images
Shares in the Asia-Pacific were mixed Monday after U.S. stocks soared on Friday following a Wall Street Journal report that some Fed officials are concerned about tightening policy too much.
Hong Kong’s Hang Seng index fell around 5%, with the Hang Seng Tech index down more than 6%.
Tai Hui, JPMorgan Asset Management’s APAC chief market strategist, said a combination of factors has been driving the Hong Kong market recently, including higher U.S. Treasury yields.
Investors may also have expected policy measures to be announced during the Communist Party of China’s 20th National Congress, which closed over the weekend with President Xi Jinping loyalists tapped to form a core leadership group.
“Since the meeting is mostly about personnel changes, the economic recovery might not come as soon as we have hoped,” Tai told CNBC in an email.
Mainland China markets briefly entered positive territory on better-than-expected economic data before falling again. The Shanghai Composite in mainland China was last 0.89% lower and the Shenzhen Component lost 0.725%.
In Australia, the S&P/ASX 200 was 1.48% higher. The Kospi in South Korea gained 0.77%, and the Kosdaq added 1.87%.
Japan’s Nikkei 225 climbed 0.49% and the Topix was up 0.41%. MSCI’s broadest index of Asia-Pacific shares outside Japan was 1.18% lower.
Authorities in Japan reportedly intervened in the forex market on Friday, causing the yen to strengthen sharply. But the currency continued to seesaw. On Monday in Asia, the currency briefly strengthened to 145-levels but was last at 148.85 per dollar.
On Friday in the U.S., the Dow Jones Industrial Average jumped 748.97 points, or 2.47%, to close at 31,082.56. The S&P 500 added 2.37% to 3,752.75. The Nasdaq Composite climbed 2.31% to 10,859.72.
Singapore, Malaysia and India’s markets are closed for a holiday Monday. Later this week, the Bank of Japan will meet, while Singapore and Australia are expected to release inflation data.
Japanese yen jumps as traders suspect intervention
TOKYO/LONDON/NEW YORK, Oct 21 (Reuters) – Japanese authorities likely intervened in markets to stem the slide of the country’s battered currency on Friday, market participants said, following an unexpected jump in the yen against the dollar.
The yen rose as high as 144.50 per dollar on Friday, up more than 7 yen from a 32-year low of 151.94 yen per dollar, touched earlier in the session. The dollar was last down 1.8% at 147.34 yen.
“It’s very clearly the Ministry of Finance stepping in to sell dollar-yen,” said Mazen Issa, senior FX strategist at TD Securities in New York.
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Karl Schamotta, chief market strategist, at Corpay in Toronto concurred. “We are hearing large blocks are being traded,” he said. “That typically means either larger institutions are moving money or that a central bank is intervening in size. The clearest evidence is just the scale of dollar selling that is happening.”
The Nikkei, citing a source, also said Japan had intervened to buy yen and sell dollars.
Japan’s Ministry of Finance declined to comment.
If confirmed, this would be the second time since September that Japan has intervened in the currency market to shore up the yen.
The currency, down about 22% against the dollar this year, has been battered as the Bank of Japan sticks to an ultra-loose monetary policy, while the U.S. Federal Reserve and other major central banks aggressively raise interest rates.
The falling yen is pushing up import costs and households’ living expenses, piling pressure on Prime Minister Fumio Kishida to stop the relentless fall.
WARNING SPECULATORS
While Bank of Japan Governor Haruhiko Kuroda has repeatedly ruled out changing the policy stance, policymakers have been vocal with their concerns.
In a speech on Friday, Kuroda stressed the central bank’s resolve to keep rates low. “Uncertainty over Japan’s economic outlook is extremely high,” Kuroda said. “We must closely watch the impact financial and currency market moves could have on Japan’s economy and price.
Japanese Finance Minister Shunichi Suzuki said earlier on Friday that the authorities were dealing with currency speculators “strictly”.
“We cannot tolerate excessive moves by speculators. We will respond appropriately while watching currency market movements with a high sense of urgency,” Suzuki said.
TD’s Issa said the market intervention happened at “a very illiquid time”, when traders in London were headed home for the weekend.
“It seems like it is designed to inflict as much pain as possible on, they like to use the term, speculators,” Issa said.
RARE MOVES
Japan has rarely intervened in currency markets. Before the September intervention, the last time it stepped in to support the currency was during the Asian financial crisis of 1997 to 1998.
It spent up to a record 2.8 trillion yen ($19.7 billion) – equivalent to half its annual defence spending – in the intervention last month. read more
Speculation that Japan would step into the market again had grown over the past week as yen weakened beyond a key psychological level of 150 per dollar on Thursday for the first time since August 1990.
While authorities have denied having a line-in-the-sand in mind, political factors mean they do need to be mindful of defending psychologically important thresholds.
They also look at technical charts for key support levels for the Japanese currency which, if broken, could accelerate its decline.
Some market participants have pointed to the dollar/yen’s July 1990 high above 152 as the next threshold, then 155.
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Reporting by Tetsushi Kajimoto and Leika Kihara in TOKYO, John McCrank, Saqib Iqbal Ahmed and Gertrude Chavez in NEW YORK and Dhara Ranasinghe in LONDON; Additional reporting by Kantaro Komiya and Sakura Murakami
Editing by Chang-Ran Kim, Shri Navaratnam, Kirsten Donovan and Diane Craft
Our Standards: The Thomson Reuters Trust Principles.