BoJ official Toichiro Asada suggests a cautious path for future rate hikes, citing weak consumption and a low nominal neutral rate, which weighs on the Japanese Yen as market expectations for a December increase cool.
BoJ board member Asada warned that further rate hikes, such as in December, could push down underlying inflation because consumption lacks momentum, and placed Japan's nominal neutral rate on the lower side of staff estimates. This dovish stance reduces expectations of near-term tightening, a typical driver of a weaker yen and a higher dollar/yen rate. The pair already trades near 159, and the speech scored 4.2/10 on FXStreet's Speechtracker, only modestly above baseline, so the move may stay contained.
Asada's warning that rate hikes could push down underlying inflation with weak consumption, plus his view that the nominal neutral rate sits on the lower side of BoJ staff estimates, signals limited appetite for early tightening. Less prospect of higher Japanese rates removes support for the yen, which the article notes has been dragged down by policy differentials. The refusal to discuss a desirable dollar/yen level also tempers any hope of policy-driven yen support.
Bank of Japan board member Toichiro Asada warned that further interest rate hikes could suppress underlying inflation as domestic consumption lacks momentum. Asada indicated that Japan's nominal neutral rate sits on the lower end of staff estimates, casting doubt on the necessity of a near-term hike in December. The comments underscore a focus on domestic price stability over currency intervention, with the USD/JPY pair trading at 159.72.
He said the central bank must be mindful that rate hikes could push down underlying inflation given consumption lacks momentum, and was asked whether a further hike such as in December would be premature.
At press time the pair trades 0.09% lower at around 159.72.
The yen has historically weakened when the BoJ's ultra-loose policy widened rate differentials with other currencies; a cautious stance on further hikes limits the rate support for the yen.