16 Jun 2015
BoJ Kuroda downplays previous comments on JPY – BTMU
FXStreet (Barcelona) - Lee Hardman, Currency Analyst at Bank of Tokyo-Mitsubishi UFJ, shares that BoJ Governor Kuroda has downplayed his previous comments on JPY depreciation, but his current stance implies that the real effective exchange rate might not weaken much further if the Bank of Japan is successful at lifting inflation.
Key Quotes
“The yen has weakened modestly in the Asian trading session following comments from BoJ Governor Kuroda in parliament today. He attempted to clarify his comments from last week which triggered a sharp strengthening of the yen, by stating that he did not mean to “evaluate the current nominal exchange rate or forecast the outlook”. More specifically he stated that “I didn’t say that I’m not seeking a weak yen in nominal terms, nor did I say that it’s unlikely that the yen will fall further”.”
“In addition, he clarified that he just gave a theoretical explanation in response to a question about real effective rates at last week’s parliamentary hearing when he stated that the yen was “unlikely to weaken further in real effective terms”.”
“BoJ Governor Kuroda is drawing a clear distinction between the real and nominal effective exchange rates. As the real effective exchange rate is also determined by relative inflation developments, BoJ Governor Kuroda may feel more comfortable talking about it given that it is not entirely currency related.”
“He may as well be indirectly implying that the real effective exchange rate may not weaken much further if the BoJ is successful at lifting inflation in Japan.”
“Speculators are likely to remain more cautious about rebuilding yen shorts in the near-term after being caught wrong-footed by last week’s comments from BoJ Governor Kuroda even after their importance has been downplayed.”
“The heightened risk of Greece defaulting which is resulting at least temporarily in more risk-averse trading conditions is also proving more supportive for the yen in the near-term.”
Key Quotes
“The yen has weakened modestly in the Asian trading session following comments from BoJ Governor Kuroda in parliament today. He attempted to clarify his comments from last week which triggered a sharp strengthening of the yen, by stating that he did not mean to “evaluate the current nominal exchange rate or forecast the outlook”. More specifically he stated that “I didn’t say that I’m not seeking a weak yen in nominal terms, nor did I say that it’s unlikely that the yen will fall further”.”
“In addition, he clarified that he just gave a theoretical explanation in response to a question about real effective rates at last week’s parliamentary hearing when he stated that the yen was “unlikely to weaken further in real effective terms”.”
“BoJ Governor Kuroda is drawing a clear distinction between the real and nominal effective exchange rates. As the real effective exchange rate is also determined by relative inflation developments, BoJ Governor Kuroda may feel more comfortable talking about it given that it is not entirely currency related.”
“He may as well be indirectly implying that the real effective exchange rate may not weaken much further if the BoJ is successful at lifting inflation in Japan.”
“Speculators are likely to remain more cautious about rebuilding yen shorts in the near-term after being caught wrong-footed by last week’s comments from BoJ Governor Kuroda even after their importance has been downplayed.”
“The heightened risk of Greece defaulting which is resulting at least temporarily in more risk-averse trading conditions is also proving more supportive for the yen in the near-term.”