Traders are treating Thursday’s Himino address as a live test of September rate hike pricing, given his standing as one of the board’s more hawkish voices. Any emphasis on upside inflation risk or the danger of falling behind the curve would likely reinforce yen strength and push JGB yields higher, tightening the case for a 25bp move at the September 17 to 18 meeting. Conversely, a more measured tone focused on data dependence could see hike bets pared back and add pressure back onto the yen, which has been trading in the high 158 range against the dollar with the 160 level watched as an intervention line. The speech also lands in the same week as the Jackson Hole symposium, raising the risk that Fed commentary competes with Himino’s remarks for FX and rates market attention.
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Earlier:
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Markets are watching Himino’s Saitama speech as the first real signal of whether the BOJ is ready to hike in September.
Summary:
- BOJ Deputy Governor Ryozo Himino speaks to business leaders in Saitama at 10:30 JST Thursday, with a press conference to follow.
- 0130 GMT / 2130 US Eastern time
- CBA says the speech offers the BOJ a chance to validate or push back against market pricing for a 25bp hike in September.
- CBA notes Himino may signal an imminent move by stressing upside inflation risks or the need to avoid falling behind the curve.
- The address is one of three pre-scheduled board speeches ahead of the September 17 to 18 policy meeting, alongside Takata on September 2 and Masu on September 10.
- Himino is regarded by markets as among the board’s hawks favouring a near-term hike; Takata dissented in July in favour of raising rates to 1.25%.
- The speech coincides with the start of the Jackson Hole symposium, with the yen trading near the high 158 level against the dollar.
Bank of Japan Deputy Governor Ryozo Himino is scheduled to address business leaders in Saitama on Thursday at 10:30 JST, in a speech markets are treating as an early test of expectations for a rate hike at the central bank’s September policy meeting. A press conference is set to follow the address.
Commonwealth Bank of Australia said the speech gives the BOJ an opportunity to either validate or push back against market pricing for a 25 basis point increase in September. According to CBA, “his speech will provide an opportunity for the BoJ to validate or push back against market expectations for a 25bp interest rate hike in September.” The bank added that Himino could signal an imminent move by emphasising upside inflation risks or the need to avoid falling behind the curve, language that would carry a distinctly hawkish tone relative to the BOJ’s typically cautious communication style.
Himino’s remarks are one of three pre-scheduled board speeches ahead of the September 17 to 18 policy meeting, with board member Hajime Takata due to speak in Sapporo on September 2 and Kazuyuki Masu following in a separate address on September 10. The sequencing echoes a pattern markets have observed around prior BOJ hikes, where officials have used pre-meeting speeches to lay groundwork for policy shifts. Himino and Masu are both viewed by markets as among the more hawkish members of the nine person board, while Takata dissented at the July meeting in favour of raising rates to 1.25 percent.
The speech arrives against a backdrop of mixed domestic data, with second quarter GDP growth described as weak even as board members continue to flag concerns over upside inflation risks. It also coincides with the opening of the Jackson Hole economic symposium in the United States, where Federal Reserve commentary is expected to compete for market attention this week. The yen has recently traded in the high 158 range against the dollar, with the 160 level widely regarded as a potential intervention threshold.
Should Himino’s tone lean hawkish, traders are likely to interpret it as reinforcing the case for a September move, adding to a week already dominated by central bank signalling on both sides of the Pacific.
Himino with the boss.
This article was written by Eamonn Sheridan at investinglive.com.