Business Oct 26, 2022
Japan expected to keep last central bank negative interest rate
Explaining the refusal to shift gears is getting harder and such doggedness risks triggering a fresh downward spiral for the embattled yen.
Explaining the refusal to shift gears is getting harder and such doggedness risks triggering a fresh downward spiral for the embattled yen.
For now, most economists expect BOJ Gov. Haruhiko Kuroda to stick with yield-curve control, until he steps down in April, even as the yen slides.
Dropping to ¥150 is seen as an important psychological level in Japan and a break may increase pressure on authorities for further action.
One-week implied volatility in the dollar-yen has fallen to trade well below highs seen last month, even as the currency pair closes on ¥145.90 per dollar.
While others are digging deep into foreign-exchange reserves to mitigate the damage, the yuan and yen’s slump threatens the region’s mantle as a preferred destination for risk investors.
Japan has become the latest major country to step directly into the foreign-exchange fray, joining nations from India to Chile that have been tapping their dollar stockpiles.
This week, as the finance minister was warning he would step into markets to shore up the yen if needed, the BOJ was boosting bond purchases to keep yields low.
Three key pillars of the sell-the-yen trade — a widening U.S.-Japan interest-rate gap, soaring oil prices and the loss of the currency’s haven status — are crumbling.
The developments are fanning fresh jitters in markets already spooked by the threat of a global slowdown amid surging inflation.
A split seems to be forming between a growing number of bearish yen watchers in Tokyo and their more positive foreign counterparts.