The Japanese Yen barely moves as a Bank of Japan deputy talks up inflation risk
The Bank of Japan (BoJ) has raised its rate twice this year, to 1.25% in September, with core inflation below its 2% target in each of the seven months to August. USD/JPY trades near 158.00 and has held between 157.50 and 159.00 for 12 sessions.
The Bank of Japan (BoJ) has maintained its interest rate at 1.25% for the second consecutive time in 2021, as core inflation remains below its 2% target. The USD/JPY exchange rate has been holding steady between 157.50 and 159.00 for the past 12 sessions. BoJ Deputy Governor Himino stated that underlying inflation is nearing 2% and that upward risks to prices are higher, suggesting that delaying policy adjustments could allow these risks to materialize.
He described financial conditions as still accommodative, with low real interest rates and rapidly growing bank lending. The Yen gained slightly due to the BoJ deputy governor's remarks, but the market quickly returned to its usual range. The BoJ is expected to keep the 1.25% rate in its next meeting on October 30, with some forecasts expecting a potential hike by December 18 at around 75%-80%.
Despite Japan's September trade deficit being larger than expected, the Yen is expected to stay in place due to the BoJ's policy stance and the significant US 10-year bond yield compared to the Japanese 10-year yield.
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