The recent coordinated intervention by Japan and the United States had a certain restraining effect on the dollar-yen exchange rate and is expected to continue potentially affecting inflation expectations. The market is closely watching the outlook for further rate hikes by the BOJ.
The recent coordinated intervention by Japan and the United States is said to have had a major impact on the dollar-yen exchange rate. Although expectations of yen depreciation to around ¥165 were widespread in late July, as of now there has been neither a move above ¥165 nor a move to test ¥160.
The intervention is viewed as having had a certain restraining effect in the foreign exchange market. While a sharp reversal of the yen’s depreciation trend itself appears unlikely, the hurdle for speculative yen selling has risen. This could prompt revisions to inflation expectations through its impact on import prices.
The BOJ places importance on underlying inflation, and developments in inflation expectations will be closely watched as one of the key grounds for future policy decisions. Although the market is viewing a rate hike in September-October as a certainty, uncertainty remains over whether the current pace can be maintained.
In light of short- and medium- to long-term inflation expectations among households and companies, revisions to the exchange rate outlook are likely to feed through into the price outlook.