[Japanese Market]Yen hits 34-year low; interest rate differential rises as Bank of Japan maintains policy – Stocks rise – Bloomberg

In the financial and securities markets on the 26th, the yen hit a new 34-year low against the dollar. With the Bank of Japan’s decision to maintain monetary policy, yen selling has become dominant, taking into account the difference in interest rates between Japan and the US. Japanese stocks are expanding their rise. Bank of Japan carries out government bond purchases in line with March meeting policy – maintains policy interest rate

At its monetary policy meeting on the same day, the Bank of Japan decided to maintain the policy rate for overnight uncollateralized calls at the current 0-0.1%. The decision to lift negative interest rates was just made at the previous meeting, which was in line with market expectations. As interest rates remain low, the interest rate differential with the US remains wide, leading to dollar buying and yen selling.

In the United States, where inflation is persistent, the Federal Reserve Board (Fed) has cut interest rates. There is awareness that the yen may be delayed, and the yen is experiencing a historic depreciation due to the difference in interest rates between Japan and the United States.The Bank of Japan believes that the weak yen will accelerate Japan’s inflation. Japan is cautious, and monetary policy will be influenced by the level of exchange rates in addition to prices.

Harumi Muguruma, chief fixed income strategist at Mitsubishi UFJ Morgan Stanley Securities, pointed out that the Bank of Japan has “not responded” to the weak yen, and that it is hard to imagine Governor Kazuo Ueda becoming more hawkish at his press conference. The yen has been depreciating in response to the meeting results, and the focus is on whether there will be foreign exchange intervention by the authorities.If the yen depreciation does not stop, it will be a stimulus market that will put pressure on the Bank of Japan to bring forward interest rate hikes and quantitative contraction. I think it’s highly likely.

The Bank of Japan said in a statement that its long-term government bond purchases will be carried out in line with the policy at its March meeting. The statement from the March meeting stated that purchases of long-term government bonds “will continue at roughly the same amount as before,” with a note stating that the purchases are “approximately 6 trillion yen.” Governor Ueda will hold a press conference at 3:30 p.m.

money order

The yen’s exchange rate accelerated after the Bank of Japan’s monetary policy announcement, dropping to the 156 yen level to the dollar for the first time since May 1990. As expectations for a US interest rate cut recede, there is no end to yen selling and dollar buying focused on the difference in interest rates between Japan and the US. There is a growing sense of caution about monetary authorities’ intervention in buying the yen.

Yujiro Goto, chief foreign exchange strategist at Nomura Securities, said that although preliminary reports had raised expectations that there would be discussions about reducing the amount of government bond purchases, the statement stated that the purchases would be carried out in line with the policy decided at the March meeting. “The yen is being sold on the assumption that there has been no clear change,” he points out.

He added, “It seems like we have passed the Bank of Japan event, and the price has exceeded 156 yen, so we will trade while being aware of whether there will be an intervention like the one in September 2022.”

At a press conference after the Cabinet meeting on the morning of the 26th, Finance Minister Shunichi Suzuki said he was closely monitoring foreign exchange market trends and wanted to take all possible measures. He declined to comment on U.S. Treasury Secretary Janet Yellen’s remarks on Monday that currency intervention should be a rare event.

bond

In the bond market, the decline in futures narrowed. The purchases came after the Bank of Japan announced that it would purchase long-term government bonds in accordance with the policy decided at the March meeting.

Katsutoshi Inadome, senior strategist at Sumitomo Mitsui Trust Asset Management, said he had been bracing himself since there was a report last night that the scale of government bond purchases would be reduced, but he was told that the current policy would be maintained, and there was no new information. He said it was a good buy.

stock

The Tokyo stock market was positive about the depreciation of the yen, and the Nikkei Stock Average, led by futures, rose by more than 460 yen at one point, before recovering to the milestone of 38,000 yen. Electronics stocks continued to rise, supported by the rise in US high-tech stocks such as Microsoft, and real estate stocks rose further in the afternoon. Insurance stocks also continue to perform well.

Takehiko Masuzawa, head of trading in the equities department at Phillip Securities, said he had been preparing for the Bank of Japan’s decision-making meeting to reveal clues about policy revisions and hawkish content, but the yen’s depreciation and stock price hikes have been caused by buybacks. He said he was deaf.