The USD/JPY pair rose to nearly 158.00, its highest level since January 15, driven by broad-based US dollar strength and continued selling in Japanese government bonds, according to BBH FX analysts.
BoJ comments eased amid JPY pressure
“Long-term Japanese government bond yields have risen on concerns about fiscal profligacy. Japanese Prime Minister Takaishi is expected to unveil a new package of economic measures worth 17.7 trillion yen (2.8% of GDP). This is more than last year’s supplementary budget of 13.9 trillion yen (2.2% of GDP) and implies that additional JGB bond issuances are in the pipeline.”
“The Japanese yen has largely ignored the hawkish comments made by BOJ board member Junko Koeda. “Given that real interest rates are currently at significantly low levels, I think the bank needs to move forward with interest rate normalization,” Koeda said.
“The swap market only has 20% odds of a rate hike at the upcoming December 19 meeting, with a full 25 basis point rate increase in March and April. Japan’s October CPI data will help shape the BOJ’s near-term interest rate outlook (11:50pm London, 6:50pm New York).”
