JPY: G7 Meeting in Focus – MUFG
Lee Hardman, Currency Analyst at MUFG, notes that the yen has weakened
modestly in the Asian trading session ahead of the G7 meeting of finance
ministers and central bank officials in Japan.
Key Quotes
“The more hawkish Fed is helping to support USD/JPY which is approaching
key resistance at around the 110.40-level. The use of fiscal stimulus
to support weak global growth is likely to be discussed at the G7
meeting. A Bloomberg report released overnight has stated that some
ruling lawmakers in Japan are proposing an enlarged fiscal stimulus
(JPY30 trillion?) to help offset the upcoming hot to the economy from
the planned sales tax hike in April of next year. It would provide an
alternative solution instead of just postponing the planned sales tax
hike until the economy is on a stronger footing.
BoJ Governor Kuroda spoke ahead of the G7 meeting reaffirming that the
BoJ will ease policy further without hesitation if required. The
negative impact from a stronger yen to the BoJ’s price target was cited
as one potential trigger for further easing. However he did not provide
any signal that further easing was imminent stating that the BoJ will
continue to examine how negative rates filter through the economy and
prices for now.
If the BoJ were to surprise by delivering further stimulus in the coming
months coinciding with a rate hike from the Fed it could potentially
have more impact on lifting USD/JPY in the near-term. However, we remain
cautious as our analysts in Tokyo do not expect further BoJ easing yet.
Risk assets could also respond unfavourably to a Fed rate hike boosting
safe haven demand for the yen.”
