The yen-dollar exchange rate hits a four-month low despite the Bank of Japan’s rate hike

Kazuo Ueda. “The comfortable financial environment will continue for now.”

Prices and wages would have to do a double whammy to push interest rates up further

On the 19th, when the Central Bank of Japan decided to raise interest rates for the first time in 17 years since February 2007 at its financial policy meeting, the employee put the yen at the center of the response to fraud and changes. Hana Bank main branch in Jung-gu, Seoul. Unique news

The yen-dollar exchange rate rose to 151 yen for the first time in four months, continuing the yen’s weakening trend. This is because the Bank of Japan, which eliminated negative interest rates, announced its policy of not rushing further rate hikes. The impact of the Bank of Japan’s policy change and the weakening of the yen on the Japanese stock market is also spilling over into the global financial market.

The Bank of Japan decided to withdraw extensive financial easing, including negative interest rate policy and measures to boost long-term interest rates, at the 19th meeting of the monetary policy decision. On the same day, Kazuo Ueda, head of the Bank of Japan, held a press conference and emphasized. Nippon Keizai Shimbun (Nikkei) says: “There seems to be no rush to raise interest rates further unless inflation rises above a certain level.”

On the 19th, Governor Ueda of the Bank of Japan said: “We will use short-term manipulation of interest rates as our main policy tool, and we will operate fiscal policy accordingly in accordance with the economic, price and financial situation.” “Assuming current economic and pricing.” “For now, we expect a comfortable financial environment,” he said. Economic experts interpret this as a tricky remark.

The reason for the weakening of the yen is the difference in interest rates between the US and Japan. However, despite the Bank of Japan’s interest rate hike on the 19th, the yen actually fell. “Although the Bank of Japan has lifted its negative interest rate policy, dollar buying has become temporarily dominant as the interest rate differential between the US and Japan is forecast to remain wide.” Nikay explained. “The Bank of Japan’s statement that the ‘weakening financial environment will continue’ appears to have encouraged buying of the dollar and selling of the yen.”

However, the stock market rose on sentiment that policy uncertainty has been resolved. The Nikkei 225 stock average (the Nikkei index) rose 19 to close at 40,003. The stock market will not be open on the 20th because it is a public holiday in Japan.

Robert Tipp of US asset management firm PGIM Fixed Income said: “The Bank of Japan has provided only limited guidance to deal with different outcomes in the economy or the foreign exchange market.” He says that “the short-term interest rate differential between Japan and the United States is still more than 5%” and “until Japanese interest rates rise by 1-2%” the yen will not strengthen. For now, it is expected that the US Federal Reserve System (FRB) will not be in a hurry to reduce interest rates based on indicators of inflation growth.

Some believe further rate hikes may never end. However, experts predicted that the Bank of Japan will need some time to take further steps. This means that indicators such as the inflation rate and wage growth must meet the targets. Former BOJ economist Hideo Hayakawa explained. “Given Governor Ueda’s very cautious nature and his focus on building consensus within the council, he will take his time and be careful in normalizing policy.”

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