The yen has fallen to levels that bring ¥160 per dollar back into view, while the currency market continues to move around that level following reports that government and BOJ officials are considering a rate hike.
In the New York market, the yen traded in the mid-¥159s per dollar, with the ¥160 level again coming under scrutiny as a floor after the yen previously weakened to around that level. The government supports an early rate hike to preserve the effect of coordinated intervention by Japan and the United States, while the BOJ is considering raising its policy rate at its September or October monetary policy meeting. According to several people familiar with the matter, the BOJ’s concern over inflation driven by yen weakness is aligned with the government’s aim of strengthening the effect of yen-buying intervention.
The rate hike had already been priced in by the market, so the latest reports are not seen as having had a major impact on the yen’s level. The yen has been trending lower in recent days, against a backdrop of the interest-rate differential between Japan and the United States and Japan’s massive debt burden. The 10-year bond yield edged up to 2.87% and remains close to its highest level in 30 years.
Masayuki Nakajima (中島将行), senior strategist at Mizuho Bank, said, “The market’s focus has shifted from whether there will be a rate hike in September to the pace of tightening thereafter.” Speculators have reduced their short yen positions. CFTC data for the week through 4 August showed that hedge funds’ short yen positions had halved as the yen stabilized following coordinated intervention.
A government official said, in general terms, that specific methods of monetary policy should be left to the BOJ. Efforts to preserve the effect of coordinated intervention by Japan and the United States and to strengthen yen-buying intervention are continuing.