Summary:
- Ueda addresses the National Securities Convention in Tokyo on Tuesday, his first major remarks since the September hike to 1.25%.
- 2.35pm Tokyo time / 0635 GMT / 0235 US Eastern time
- Markets see an October hike as the less likely outcome, with one estimate near one in four.
- July minutes showed a hawkish tilt. September’s summary of opinions included a view that there is no need to rush.
- Deputy Governor Uchida said on Monday that AI is a positive demand shock adding upward pressure on activity and prices.
- USD/JPY briefly dipped to around 157.5 after Uchida’s remarks before recovering toward 158.
Bank of Japan Governor Kazuo Ueda addresses the National Securities Convention in Tokyo on Tuesday. These are his first major public remarks since the bank lifted its policy rate to 1.25% last month. Yen traders will be listening for any signal that a second straight increase is under consideration at the October policy meeting.
The September move took the benchmark rate to its highest level in 31 years. Since then the messaging has been mixed. Minutes of the July meeting, released late last month, showed board members leaning toward further tightening, and some argued the bank should guard against inflation overshooting its 2% target. Ueda kept the timing and pace of future increases open while making the direction clear. By contrast, the summary of opinions from the September meeting, published on October 1, included a view that there was no need to rush. A government representative was also 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.
Deputy Governor Shinichi Uchida offered few direct policy clues on Monday. His remarks opened an academic conference on artificial intelligence and big data, but they 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. On balance, he suggested, the demand-side effect is arriving first and is leaving conditions more accommodative. He also warned of correction risk if expected profits do not materialise. USD/JPY slipped to around 157.5 after the remarks before recovering toward 158.
That backdrop gives Tuesday’s speech extra weight, since Ueda has in the past used public appearances to steer expectations ahead of decisions. Some market watchers expect his tone to be largely unchanged from September, which would limit the market reaction.
The key questions are whether he describes current financial conditions as still accommodative, how he characterises yen weakness and its pass-through to underlying inflation, and whether he signals that the bank needs more time to assess the impact of the September hike. Japanese wage and household spending data, also due on Tuesday, add further context.
This article was written by Eamonn Sheridan at investinglive.com.