Synopsis:

The yen strengthened overnight as BoJ Governor Ueda's comments left the door open for a December rate hike. Despite this, MUFG maintains its forecast for a January hike but acknowledges the potential for an earlier move if yen weakness persists.

Key Points:

• Governor Ueda's Comments:

  • Ueda stated it is too early to predict the outcome of the December policy meeting, highlighting the importance of upcoming data.
  • This contrasts with earlier signals that pointed to a likely pause until January, reviving speculation about a possible December hike.

• Yen Reaction:

  • The yen appreciated, with USD/JPY falling below 155.00, supported by heightened expectations of a potential December move.

• BoJ's Focus on FX Movements:

  • Ueda emphasized that exchange rate movements are a factor in shaping the BoJ’s economic and inflation outlook, particularly amid the yen’s recent sharp depreciation.

• MUFG's Stance:

  • MUFG continues to expect a rate hike in January but recognizes the possibility of an earlier move should the yen weaken significantly in the interim.

Conclusion:

While MUFG sticks to its forecast for a January rate hike, Governor Ueda’s comments have reignited speculation about a December hike. The BoJ’s sensitivity to exchange rate dynamics may accelerate its timeline if yen depreciation continues, providing further support for the currency.