In the Asian session on Tuesday (June 13), USD/JPY fell back from its highs, temporarily reporting at 139.43, a drop of 0.09%. Economists already expect the BOJ to raise its inflation forecast for July given continued strength in prices. That could provide evidence for an initial policy shift next month before a more significant one.
The latest developments from the Bank of Japan:
They believe that if Ueda chooses to act early, the most likely move is to adjust or give up yield control. Currency strategist Hirofumi Suzuki said it was widely believed that the rate adjustment would be executed without warning. The BOJ could even raise the yield cap again this month, he said. The BOJ emphasized that it will carefully adjust policy if necessary, so it has not completely ruled out this possibility. On the economic front, while inflation in Japan remains well above 3%, wage growth still lacks the strength needed to stem a decline in households’ real spending power. Ueda warned that moving too quickly would pose a greater risk of stabilizing inflation than lagging behind. The central banker may be able to wait in the short term, as pressure from global peers to tighten policy remains dependent on data. Japanese futures markets show no sign of an increase in short sellers betting on an imminent turnaround. “Judging from wages, inflation and other data, it is unlikely that the BOJ will adjust or remove yield curve control anytime soon,” said Shinkin Asset Management analyst Jun Kato.
