Key Takeaways

  • The yen continues to strengthen against a weaker US dollar 
  • Comments from BoJ governor Kazuo Ueda spark policy change whispers

In Tokyo

The Japanese yen has risen over 1% against the US dollar, with the major currency pair trading at ¥144.5 Thursday morning. The yen’s strength comes in light of remarks made by Bank of Japan governor Kazuo Ueda that stoked speculation the central bank may soon abandon its ultra-loose monetary policy. 

Japanese policymakers have long been hinting at changing their sub-zero approach. The central bank recently relaxed its grip on its yield curve control (YCC), allowing for some flexibility to the 1% upper-limit level from the current 0% policy on 10-year government bond yields. This little tweak fueled whispers among market participants that if the BoJ was willing to make that change, then the era of negative interest rates may be drawing to a close. 

That being said, the BoJ has still to make any moves away from its current benchmark interest rate of -0.1%. However, economists are placing their bets on rate hikes in the near future as inflation continues to hover over the central bank’s 2% goal. 

Head of the BoJ, Kazuo Ueda, spoke to the media after meeting with Prime Minister Fumio Kishida to discuss the details of the bank’s future plans. The governor didn’t provide too much information to the press, however did state that the bank is not “at a stage to talk about an exit” right now, but is willing to communicate effectively to ensure a smooth process “when it happens”.

The next BoJ policy meeting is booked for Dec. 18 – Dec. 19. 

On the US Front

Back in New York, US market participants are placing their own bets on an interest rate cut. The Japanese and US central banks vastly differ in their policy stances. While the BoJ’s strategy is to keep interest rates lower, the US Federal Reserve has pushed rates higher in their efforts to quell inflation. 

Nonetheless, it looks like the Fed’s hawkish strategy may finally be taking effect. Tuesday’s job openings and labor turnover survey (JOLTS), reported by the US Bureau of Labor Statistics, revealed that the labor market cooled off in October, with jobs advertised falling to only 8.73 million in October, down from 9.35 million in September.

Tuesday’s JOLTS report, although useful, is not so much respected as a true indicator of economic health. Friday’s upcoming US employment report will provide a more accurate depiction of the current state of the economy. Market participants eagerly await the data, as once both reports are released, a combination of the two can paint a more detailed picture of the labor market.

Altogether, given the recent developments in Tokyo and hints being dropped by the BoJ, it would be wise for traders to keep a close eye on the upcoming policy meeting. On top of that, traders may find some valuable insights in this Friday’s US jobs report. Overall, staying informed and flexible over central bank moves will only benefit you – staying ahead of the competition by using an economic calendar will give you the tip-off you need to avoid any big losses.