Is the BoJ Ready to Raise Interest Rates?
The Japanese yen continued to strengthen for the second consecutive day due to a weak US dollar and new comments from BoJ Governor Kazuo Ueda. Ueda said the Bank of Japan is getting closer to achieving its 2% inflation target on a stable basis, and this was immediately interpreted by the market as a signal that the BoJ could raise interest rates soon, perhaps as early as next week. This contrasts sharply with the Fed, which recently cut interest rates dovishly. So, while the US is loosening policy and the dollar is weakening, Japan appears poised to move toward tightening, making the yen much more attractive relative to the dollar.
On the other hand, there are restraining factors for the yen's strength. Prime Minister Sanae Takaichi's administration is ramping up fiscal spending, which has raised market concerns about Japan's future financial condition. Furthermore, global stock markets are likely optimistic, potentially easing interest in safe-haven assets like the yen. Many traders are also choosing to wait and not aggressively buy the yen until there is certainty from the BoJ meeting on December 18-19. Until that decision is made, the yen remains fundamentally supported, but its movements will remain highly sensitive to the latest signals from the BoJ. (az)
Source: Newsmaker.id
