Investors Warn BOJ Credibility Is Tested as Yen Sinks Past ¥163 and Rates Stay at 1%
Updated
Updated · Financial Times · Jul 30
Investors Warn BOJ Credibility Is Tested as Yen Sinks Past ¥163 and Rates Stay at 1%
3 articles · Updated · Financial Times · Jul 30
Summary
¥163 per dollar has become the flashpoint for investors pressing the Bank of Japan to signal faster tightening at Friday’s meeting, even though markets expect rates to stay at 1%.
One more quarter-point hike by January is all derivatives markets currently price in, despite the yen’s slide to its weakest level since 1986 and 10-year JGB yields nearing 3%, their highest this century.
Inflation has edged up but remains below target—headline CPI rose to 1.7% in June and core to 1.6%—leaving the BOJ caught between defending credibility and avoiding a sharp rise in borrowing costs.
Japan on Thursday cut its fiscal-year growth forecast to 0.9% from 1.3%, citing higher oil prices, while investors also worry that a ¥370tn investment plan and food-tax cuts could add to inflation and borrowing pressure.
Attention now turns to Governor Kazuo Ueda’s press conference for clues on political independence and whether he opens the door to an October hike, which traders currently assign a 70% probability.