(Bloomberg) -- The yen eventually swung to a gain as investors digested the Bank of Japan rate hike and Governor Kazuo Ueda’s press conference but there are still plenty of uncertainties about the longer-term outlook for the currency, analysts and strategists said.
Many traders were just waiting for a signal to buy the yen and they got it after Ueda’s press conference, according to StoneX Financial. I don’t see the BOJ statement as bullish for the yen given the expectations — it was generally a mixed outcome for Japanese assets, says RBC Capital Markets.
Here’s what analysts and strategists had to say:
After Ueda Press Conference
Mingze Wu, a currency trader at StoneX Financial in Singapore
European traders are purchasing the yen against the dollar after digesting BOJ Governor Kazuo Ueda’s comments at the press conference. The market seems erratic, but sometimes many traders are just waiting for the ‘go’ signal.
European traders are getting bullish on the yen after Ueda’s conference. This could just be a delayed reaction.
Hirofumi Suzuki, chief foreign-exchange strategist at Sumitomo Mitsui Banking Corp.
The FOMC meeting and US jobs data are coming up, but in the near term, the yen is likely to test the 150-yen level due to the BOJ’s pressure on the yen. The BOJ is willing to raise interest rates if the move is in line with its economic and price outlook.
The focus on the exchange rate and the statement that the 0.5% rate is not a barrier will make us aware of the fact that the rate hike will be done quietly.
Alan Lau, currency strategist at Malayan Banking Bhd.
The hike today appears rather preemptive in nature as Ueda and the BOJ appear to sound more confident now about the state of the economy and inflation. This contrasts with their slower reaction in prior years when they had been cautious on adjusting, even as inflation may have been showing signs of pick-up.
We see the possibility of USD/JPY coming off more this year if the Fed can signal more strongly toward an easing cycle starting.
After BOJ Rate Decision
Shunsuke Oshida, head of credit research at Manulife Investment Management Japan
There may be another interest-rate hike by the BOJ during this fiscal year through March as prices are rising. Upward pressure on rates may persist a little, which will likely push credit spreads higher. Stronger appetite for JGB investment due to higher rates could also cut demand for corporate bond investment in the short term, another reason for credit spreads to widen.
Yasuhiko Hirakawa, investment department manager at Rakuten Investment Management
A rate hike had been already priced in, as information has been leaked this month. It would have been difficult to hike in September considering the political calendar.
I would like to see what Ueda has to say at his news conference. If he indicates that there will be no more rate hikes this year, the yen will resume weakening, probably to the 155-to-160 per dollar range. If he suggests there could be another rate hike to 0.5%, then I think people will be more nervous.
Alvin T. Tan, head of Asia FX strategy at RBC Capital Markets
I don’t see it as bullish for the yen given the expectations going into the meeting. It’s generally a mixed outcome for Japanese assets given the mixed decision relative to expectations of a 1 trillion yen quantitative tightening, along with market pricing of a 12 basis-point rate hike. In short, the BOJ decision today does not significantly exceed the hawkish market expectations baked into the meeting.
Charu Chanana, head of currency strategy at Saxo Capital Markets
This must be one of the BOJ’s most hawkish moves given how low it has set the standard to be. Pressure on yen will likely continue if the Federal Reserve stays away from a clear indication of a September rate cut later today. Japanese equities warrant a cautious stance, and banks will likely be disappointed by the shallower BOJ cut to bond purchases. Still structural themes in Japan continue to be interesting — such as those related to corporate governance reforms, or geopolitical plays.
--With assistance from Ayai Tomisawa, Masaki Kondo, Ruth Carson, David Finnerty, Hideyuki Sano, Aya Wagatsuma, Momoka Yokoyama, Matthew Burgess and Daisuke Sakai.
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