As expectations grew for a BOJ rate hike and a review of GPIF's asset allocation, the yen reversed sharply and rose to the low 156s. Traders are again alert to intervention risk, with a possible change in policy at the BOJ's 17-18 meeting the focus of attention.
The yen's gradual weakening trend of the past month has reversed, heightening market caution over coordinated intervention by Japan and the United States, while factors supporting a stronger yen have also emerged. Market participants have not entirely ruled out the possibility of intervention by the BOJ and are said to be mindful of the prospect of intervention returning. As a result, the yen has at times shown unstable short-term movements.
On the 3rd, the yen rose briefly to the low 156s against the dollar, reaching its highest level in about a month. A rate hike is under consideration at the BOJ's Monetary Policy Meeting to be held this month, and market attention is focused on moves related to the size and path of any increase in the policy rate. People familiar with the matter have pointed to the possibility of a hike.
According to interviews with several people familiar with the matter, the BOJ is expected to raise its policy rate by 0.25 percentage points to 1.25% at this month's meeting. Some are mindful of upside risks to prices, and the BOJ is reportedly planning to respond flexibly to market conditions regarding the pace of rate increases. Policy Board member Takata Hajime (高田創) is said to have suggested the need for a flexible response.
Hideaki Minami (南英明), a director at Mizuho Bank, pointed to the possibility that yen buying could lead the market, particularly amid overseas speculation about a large rate hike, while some observers consider it premature to conclude that the yen's weakening trend has reversed. The government and the BOJ have previously conducted yen-buying interventions, including coordinated intervention with the United States, but selling pressure on the yen remains strong because of heightened tensions in the Middle East and higher oil prices, and caution over future developments continues.