Incoming BOJ governor Ueda tips his hat to ultra-loose policy

There have been high hopes that Ueda will bring a hawkish twist to the BOJ, but early remarks in his confirmation speech say anything but. He has echoed similar comments from other BOJ officials in recent days, stating that the BOJ’s current monetary easing is appropriate, it takes time for the impact of monetary policy to be felt in the economy and that economic uncertainties are high.

Ueda blames cost-push inflation for rising prices – driven by higher raw materials and wages – and added that the BOJ respond to demand-driven inflation. He also expected inflation to fall below 2% by the middle of the next fiscal year. And let’s hope he is right, as I see no obvious signs of peak inflation looking at today’s figures.

Japan’s inflation continues to rise, with core CPI rising to 4.2% to notch up its 10^th consecutive month above the BOJ’s 2% target. Let’s be honest, there’s no immediate sign of any ‘peak’ in sight, and were it any other central bank they’d have hiked 5 or more times already. But this is no other central bank.

I had expected USD/JPY to rally (and the yen broadly weaken) if or when Ueda confirmed that the BOJ’s ultra-loose policies were to remain in place. Yet we saw the opposite, with USD/JPY falling -0.6% from its daily high and finding support at 134. But we’re likely seeing market reactions from pre-emptive bets closed out, so perhaps we can look past the noise and see if USD/JPY can rally later in the session (or when traders across Europe or the US react).

USD/JPY 1-hour chart:

The current daily low stopped just shy of the 143 handle, and the lower band of the overnight implied volatility levels at the start of the session. Assuming Ueda continues to tow the party line of ultra-loose policy, bulls may want to consider dips above 134 for an anticipated break back above the Jan high and 135 handle. And with US inflation data very much in focus today, a hot print could potentially see the pair break to new high.

This report is intended for general circulation only. It should not be construed as a recommendation, or an offer (or solicitation of an offer) to buy or sell any financial products. The information provided does not take into account your specific investment objectives, financial situation or particular needs. Before you act on any recommendation that may be contained in this report, independent advice ought to be sought from a financial adviser regarding the suitability of the investment product, taking into account your specific investment objectives, financial situation or particular needs.

StoneX Financial Pte. Ltd., may distribute reports produced by its respective foreign entities or affiliates within the StoneX group of companies or third parties pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the report is distributed to a person in Singapore who is not an accredited investor, expert investor or an institutional investor (as defined in the Securities Futures Act), StoneX Financial Pte. Ltd. accepts legal responsibility to such persons for the contents of the report only to the extent required by law. Singapore recipients should contact StoneX Financial Pte. Ltd. at 6826 9988 for matters arising from, or in connection with the report.

In the case of all other recipients of this report, to the extent permitted by applicable laws and regulations neither StoneX Financial Pte. Ltd. nor its associated companies will be responsible or liable for any loss or damage incurred arising out of, or in connection with, any use of the information contained in this report and all such liability is hereby expressly disclaimed. No representation or warranty is made, express or implied, that the content of this report is complete or accurate.

StoneX Financial Pte. Ltd. is not under any obligation to update this report.

Trading CFDs and FX on margin carries a high level of risk that may not be suitable for some investors. Consider your investment objectives, level of experience, financial resources, risk appetite and other relevant circumstances carefully. The possibility exists that you could lose some or all of your investments, including your initial deposits. If in doubt, please seek independent expert advice. Visit www.cityindex.com/en-sg/terms-and-policies for the complete Risk Disclosure Statement.

ALL TRADING INVOLVES RISKS. LOSSES CAN EXCEED DEPOSITS.

City Index is a trading name of StoneX Financial Pte. Ltd. (“SFP”) for the offering of dealing services in Contracts for Differences (“CFD”). SFP holds a Capital Markets Services Licence issued by the Monetary Authority of Singapore for Dealing in Exchange-Traded Derivatives Contracts, Over-the-Counter Derivatives Contracts, and Spot Foreign Exchange Contracts for the Purposes of Leveraged Foreign Exchange Trading. SFP is also both Derivatives Trading and Clearing member of the Singapore Exchange (“SGX”). SFP is a wholly-owned subsidiary of StoneX Group Inc.

The information provided herein is intended for general circulation. It does not take into account the specific investment objectives, financial situation or particular needs of any particular person. You should take into account your specific investment objectives, financial situation or particular needs before making a commitment to invest, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

The information does not represent an offer of, or solicitation for, a transaction in any investment product. Any views and opinions expressed may be changed without an update. To understand the risks and costs involved, please visit the section captioned “Important Information” and the “Risk Disclosure Statement”.

The information herein is not directed to, or intended for distribution to or use by, any person or entity who is a citizen or resident of or located in any locality, state, country or other jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation.

StoneX Financial Pte. Ltd. 1 Raffles Place, #18-61, One Raffles Place Tower 2, Singapore 048616. Tel: 6309 1000. Co. Reg. No.: 201130598R.

This advertisement has not been reviewed by the Monetary Authority of Singapore.