Bank of Japan Governor Kazuo Ueda delivers his first public remarks since September's rate hike to 1.25% on Tuesday, with traders watching for signals on a possible second increase this month. Market pricing currently favors a pause, but policymakers have sent mixed signals.
Ueda speech carries added weight
Ueda addresses the National Securities Convention in Tokyo on Tuesday, his first major public appearance since the Bank of Japan lifted its policy rate to 1.25% last month, the highest level in 31 years. Yen traders are listening for any signal that a second straight rate hike is under consideration at this month's policy meeting. Ueda has used public appearances before to steer expectations ahead of decisions, and some market watchers expect his tone to largely match September's, which would limit the market reaction.
Policymakers send mixed signals
Minutes of the July meeting, released late last month, showed board members leaning toward further tightening, with some arguing the bank should guard against inflation overshooting its 2% target. By contrast, the summary of opinions from the September meeting, published on October 1, included a view that there was no need to rush, and a government representative was reported to have urged restraint on further hikes.
Market pricing reflects that ambivalence. An October hike is seen as the less likely outcome, with one estimate putting the odds at roughly one in four, though some analysts have flagged the possibility of back-to-back moves.
Uchida flags AI as a demand shock
Deputy Governor Shinichi Uchida offered few direct policy clues on Monday, but his remarks at an academic conference on artificial intelligence and big data still leaned toward vigilance on inflation. Uchida described AI as a significant positive demand shock adding upward pressure to activity and prices. He said it had eased financial conditions by lifting share prices, even as heavy bond issuance by AI-related companies pushed long-term yields higher, and he warned of correction risk if expected profits do not materialize.
USD/JPY slipped to around 157.5 after Uchida's remarks before recovering toward 158.
The key questions for Tuesday are whether Ueda describes current financial conditions as still accommodative, how he characterizes yen weakness and its pass-through to underlying inflation, and whether he signals the bank needs more time to assess September's hike. Japanese wage and household spending data, also due Tuesday, add further context.
Source: InvestingLive
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