Bank of Japan (BOJ) Governor Kazuo Ueda yesterday joined his deputy in raising market expectations of a potential interest rate hike next week, boosting the yen and signaling the central bank is doing its utmost to avoid a global market crash that followed the rate hike in July last year.
The governor also indicated rising confidence over wage increases after hearing encouraging views at various new year events and at the BOJ’s recent branch managers’ meeting. He was speaking at an event hosted by the Regional Banks Association of Japan.
That suggests one of two key elements the bank needs ahead of a rate hike is cleared, as it tries to gauge the future of the US economy when US president-elect Donald Trump takes over the White House next week.
Photo: Reuters
Following Ueda’s remarks, the yen strengthened as much as 0.5 percent to ￥157.17 against the US dollar, after earlier hovering at about ￥158.
Ueda’s latest comments come as BOJ watchers seek clues about the possibility of an increase in borrowing costs in the lead up to the central bank’s policy meeting on Wednesday and Thursday next week. Overnight index swaps show a 68 percent chance of a rate hike this month, with the odds rising to 86 percent by March. The governor’s comments yesterday were more specific about what might be discussed at the meeting compared with his views earlier this month.
Ueda’s remarks suggest the central bank’s two top officials are on the same page. BOJ Deputy Governor Ryozo Himino on Tuesday said the policy board would decide whether to raise rates, signaling the possibility of a hike and boosting market expectations.
“Ueda’s comments are broadly similar to Himino’s, but given he’s the governor, the weight of his words are different,” Kansai Mirai Bank currency strategist Takeshi Ishida said. “The market interpreted it as an increasing possibility of a January rate hike.”
Following the BOJ’s rate hike in July, global markets tanked, with the Nikkei 225 Stock Average falling by the most on record. Since then, the central bank has faced criticism about its communications, with Ueda being brought into parliament for questioning.
“It is not desirable for the conduct of monetary policy to intentionally cause surprises,” Himino said on Tuesday. “The effectiveness of monetary policy depends significantly on how widely and accurately the central bank’s intentions are understood.”
At the upcoming meeting, the bank is also to release its updated economic outlook report, where officials are likely to discuss raising their inflation outlook, people familiar with the matter said.
The BOJ released its regional economic report following its branch managers’ meeting earlier this month, indicating some progress in pay gains. Businesses are increasingly aware of the need for sustained wage growth, the report said.
Wage negotiations have started on a relatively positive note, with some companies, including retail giant Aeon Co and insurer Nippon Life Insurance, reportedly planning to raise salaries for certain employees by at least 6 percent.
After last month’s policy meeting, Ueda said that he wanted to see additional information on wage trends.
Himino said that Trump’s inauguration speech on Monday next week might give a clearer idea of the direction of US economic policy going forward.
ADVANCED: Previously, Taiwanese chip companies were restricted from building overseas fabs with technology less than two generations behind domestic factories Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), a major chip supplier to Nvidia Corp, would no longer be restricted from investing in next-generation 2-nanometer chip production in the US, the Ministry of Economic Affairs said yesterday. However, the ministry added that the world’s biggest contract chipmaker would not be making any reckless decisions, given the weight of its up to US$30 billion investment. To safeguard Taiwan’s chip technology advantages, the government has barred local chipmakers from making chips using more advanced technologies at their overseas factories, in China particularly. Chipmakers were previously only allowed to produce chips using less advanced technologies, specifically
The New Taiwan dollar is on the verge of overtaking the yuan as Asia’s best carry-trade target given its lower risk of interest-rate and currency volatility. A strategy of borrowing the New Taiwan dollar to invest in higher-yielding alternatives has generated the second-highest return over the past month among Asian currencies behind the yuan, based on the Sharpe ratio that measures risk-adjusted relative returns. The New Taiwan dollar may soon replace its Chinese peer as the region’s favored carry trade tool, analysts say, citing Beijing’s efforts to support the yuan that can create wild swings in borrowing costs. In contrast,
BRAVE NEW WORLD: Nvidia believes that AI would fuel a new industrial revolution and would ‘do whatever we can’ to guide US AI policy, CEO Jensen Huang said Nvidia Corp cofounder and chief executive officer Jensen Huang (黃仁勳) on Tuesday said he is ready to meet US president-elect Donald Trump and offer his help to the incoming administration. “I’d be delighted to go see him and congratulate him, and do whatever we can to make this administration succeed,” Huang said in an interview with Bloomberg Television, adding that he has not been invited to visit Trump’s home base at Mar-a-Lago in Florida yet. As head of the world’s most valuable chipmaker, Huang has an opportunity to help steer the administration’s artificial intelligence (AI) policy at a moment of rapid change.
TARIFF SURGE: The strong performance could be attributed to the growing artificial intelligence device market and mass orders ahead of potential US tariffs, analysts said The combined revenue of companies listed on the Taiwan Stock Exchange and the Taipei Exchange for the whole of last year totaled NT$44.66 trillion (US$1.35 trillion), up 12.8 percent year-on-year and hit a record high, data compiled by investment consulting firm CMoney showed on Saturday. The result came after listed firms reported a 23.92 percent annual increase in combined revenue for last month at NT$4.1 trillion, the second-highest for the month of December on record, and posted a 15.63 percent rise in combined revenue for the December quarter at NT$12.25 billion, the highest quarterly figure ever, the data showed. Analysts attributed the
RSS