Around half of the economists in a Reuters poll expect a rollback of easing, including a tweak to YCC, in either July or September. Ueda could open the door to this on Friday, nodding to inflation currently overshooting BOJ forecasts and a potential upgrade to BOJ price projections in July, they said.
But Ueda has stressed the need to maintain ultra-loose policy until durable wage growth accompanies rising prices. Changes to YCC may come as soon as July, but an interest rate hike is a long way off – Bank of America analysts think rates will stay on hold until summer 2024.
If Japanese assets are any indication, investors expect Ueda and his colleagues to err on the dovish side.
The yen on Thursday slid to a new low for the year through 141.00 per dollar and, most remarkably after the ECB made it clear it will raise rates further, to a 15-year low against the euro of 153.68 per euro.
Japanese authorities will be watching these developments closely and intervention to stop the rot cannot be ruled out. Perhaps 145.00 per dollar would be the trigger.
The cheapness of Japan’s currency has made its stock markets extremely attractive to foreign investors. The benchmark Nikkei 225 index rose to fresh 33-year high of 33,767 points on Thursday before closing marginally lower.
