Latest news with #Bank of Japan
Free Malaysia Today
2 days ago
- Business
- Free Malaysia Today
Yen wobbles as traders process trade deal and political uncertainty
The yen was last steady on the day at ¥146.83 to the US dollar. (AP pic) TOKYO : Market focus was on the yen today, which traded choppily as traders weighed speculation about the future of Japanese Prime Minister Shigeru Ishiba against US President Donald Trump's announcement of a trade deal with Japan. The yen initially hit its strongest level since July 11 at 146.20 per dollar on the trade news but flipped to losses after reports Ishiba intends to step down next month following a bruising upper house election defeat. Ishiba said the reports he had already decided to resign were 'completely unfounded', and the yen recovered somewhat and was last steady on the day at ¥146.83 to the dollar. The trade deal – which lowers tariffs on auto imports and spares Tokyo from punishing new levies – affects the yen both because of what it means for the economy and also the Bank of Japan (BOJ), which has been cautiously raising interest rates. 'A trade deal does allow more potential for the Bank of Japan to hike interest rates this year,' said Jane Foley, head of FX strategy at Rabobank. 'That's a yen positive and clearly makes a move back to 150 (yen per dollar) harder,' Foley said. 'When there was trade and political uncertainty, clearly they weren't going to do anything. 'Of course we haven't sidestepped all the political uncertainty, and that's going to stop the BOJ from making any hasty decisions, but no one was expecting anything hasty anyway,' Foley added. Moves in other currencies were pretty muted due to the uncertainty around tariffs, as well as doubts about how currencies would react even if there were there any greater certainty. The US dollar has been one of the biggest losers since Trump announced sweeping tariffs on trading partners on April 2, weakness which continued as those duties were suspended to allow further negotiations, but which has petered out somewhat this month. The euro was last down 0.1% on the day at US$1.1744 but still near a four-year high it touched at the start of the month. Sterling was up a touch at US$1.1354. In contrast to the euro, European equities rallied on hopes the trade deal with Japan could pave the way for more deals, including with Europe. Trump said negotiators from the EU would be in Washington today. The European Central Bank meets tomorrow, but is unlikely to have a dramatic effect on the currency and is expected to hold rates steady. Improved sentiment towards the global economy from the trade deal, as well as higher metal prices, boosted the Australian dollar, although sentiment remained cautious. The Aussie firmed 0.4% to US$0.6581.
CNA
2 days ago
- Business
- CNA
Yen wobbles as traders process trade deal and political uncertainty
TOKYO/LONDON :Currency traders focused on Wednesday on the yen, which see-sawed as they weighed speculation about the future of Japanese Prime Minister Shigeru Ishiba against U.S. President Donald Trump's announcement of a trade deal with Japan. The Japanese currency initially hit its strongest level since July 11 at 146.20 per dollar on the trade news but flipped to losses after reports Ishiba intends to step down next month following a bruising upper house election defeat. Ishiba said the reports he had already decided to resign were "completely unfounded", and the yen recovered to leave the dollar last down 0.23 per cent at 146.33 yen. The trade deal - which lowers tariffs on auto imports and spares Tokyo from punishing new levies - affects the yen both because of what it means for the economy and also the Bank of Japan, which has been cautiously raising interest rates. "A trade deal does allow more potential for the Bank of Japan to hike interest rates this year," said Jane Foley, head of FX strategy at Rabobank. "That's a yen positive and clearly makes a move back to 150 (yen per dollar) harder." "When there was trade and political uncertainty, clearly they weren't going to do anything. Of course we haven't sidestepped all the political uncertainty, and that's going to stop the BOJ from making any hasty decisions, but no one was expecting anything hasty anyway." Moves in other currencies were muted due to the uncertainty around tariffs, as well as doubts about how currencies would react even if there were any greater certainty. The U.S. dollar had been one of the biggest losers since Trump announced sweeping tariffs on trading partners on April 2, weakness which continued as those duties were suspended to allow further negotiations, but which has steadied this month. The euro was last down 0.2 per cent on the day at $1.1728, possibly helped by fading expectations of a collapse in global trade that would see flows out of the U.S. continue, but still near a four-year high it touched at the start of the month. In contrast to the euro, European equities rallied on hopes the trade deal with Japan could pave the way for more deals, including with Europe. Trump said negotiators from the European Union would be in Washington on Wednesday. The European Central Bank meets on Thursday, but is unlikely to have a dramatic effect on the currency and is expected to hold rates steady. Sterling was up a touch at $1.1354, and the improved sentiment towards the global economy from the trade deal, as well as higher metal prices, boosted the Australian dollar, last up 0.66 per cent at $0.6599, its highest in eight months.
Reuters
2 days ago
- Business
- Reuters
Yen wobbles as traders process trade deal and political uncertainty
TOKYO/LONDON, July 23 (Reuters) - Market focus was on the yen on Wednesday, which traded choppily as traders weighed speculation about the future of Japanese Prime Minister Shigeru Ishiba against U.S. President Donald Trump's announcement of a trade deal with Japan. The yen initially hit its strongest level since July 11 at 146.20 per dollar on the trade news but flipped to losses after reports Ishiba intends to step down next month following a bruising upper house election defeat. Ishiba said the reports he had already decided to resign were "completely unfounded", and the yen recovered somewhat and was last steady on the day at 146.83 to the dollar. The trade deal - which lowers tariffs on auto imports and spares Tokyo from punishing new levies - affects the yen both because of what it means for the economy and also the Bank of Japan, which has been cautiously raising interest rates. "A trade deal does allow more potential for the Bank of Japan to hike interest rates this year," said Jane Foley, head of FX strategy at Rabobank. "That's a yen positive and clearly makes a move back to 150 (yen per dollar) harder." "When there was trade and political uncertainty, clearly they weren't going to do anything. Of course we haven't sidestepped all the political uncertainty, and that's going to stop the BOJ from making any hasty decisions, but no one was expecting anything hasty anyway." Moves in other currencies were pretty muted due to the uncertainty around tariffs, as well as doubts about how currencies would react even if there were there any greater certainty. The U.S. dollar has been one of the biggest losers since Trump announced sweeping tariffs on trading partners on April 2, weakness which continued as those duties were suspended to allow further negotiations, but which has petered out somewhat this month. The euro was last down 0.1% on the day at $1.1744 but still near a four-year high it touched at the start of the month. Sterling was up a touch at $1.1354. In contrast to the euro, European equities rallied on hopes the trade deal with Japan could pave the way for more deals, including with Europe. Trump said negotiators from the European Union would be in Washington on Wednesday. The European Central Bank meets on Thursday, but is unlikely to have a dramatic effect on the currency and is expected to hold rates steady. Improved sentiment towards the global economy from the trade deal, as well as higher metal prices, boosted the Australian dollar, although sentiment remained cautious. The Aussie firmed 0.4% to $0.6581.
CNA
2 days ago
- Automotive
- CNA
Japan's Nikkei soars to one-year peak on trade deal; bonds slide
TOKYO :Japanese automakers led a surge in the Nikkei share average to a one-year peak on Wednesday, after Tokyo reached a trade deal with Washington, ending a months-long stalemate. Under the agreement, Japanese exports to the United States face a 15 per cent levy, down from a threatened tariff of 25 per cent. Specific duties on autos, which account for more than a quarter of Japan's U.S. exports, also fell to 15 per cent from 25 per cent. The Nikkei rallied 3.5 per cent to end the day at 41,171.32, its highest close since July last year. The Tokyo Stock Exchange's transport equipment index soared nearly 11 per cent, with Toyota Motor surging more than 14 per cent. The clarity on tariffs bolstered the case for the Bank of Japan to resume raising interest rates, lifting short-term Japanese government bond yields. Longer-term JGB yields also climbed, with local media reporting that embattled Prime Minister Shigeru Ishiba was preparing to step down, suggesting a shift in the political landscape towards increased fiscal largesse. Ishiba has denied the reports. The 10-year yield shot to the highest since 2008 at 1.6 per cent, while a 40-year debt auction garnered the lowest demand since 2011. The yen weakened about 0.3 per cent to 147.02 per dollar after initially flipping between gains and losses. "As long as the political situation doesn't deteriorate too much more, we suspect Japan's equity rally has further to run," Capital Economics head of Asia Pacific markets Thomas Mathews wrote in a note. For the rates market, "our sense is that investors are still underestimating how fast the central bank will hike this year and next," Mathews said. Ishiba is facing growing opposition from within his Liberal Democratic Party for his vow to stay in power despite the ruling coalition's drubbing in Sunday's election, which resulted in the loss of the coalition's upper house majority. Opposition parties calling for debt-funded consumption tax cuts made big gains at the polls. The yield on 40-year JGBs climbed 8.5 basis points to hit 3.46 per cent. Thirty-year yields advanced as much as 6.5 basis points to 3.15 per cent, approaching last week's all-time high of 3.20 per cent. Two-year yields, which are more sensitive to the monetary policy outlook, jumped 8 basis points to 0.83 per cent, the highest since April 2, when U.S. President Donald Trump shocked markets with his aggressive "Liberation Day" tariff announcement. Expectations for tighter monetary policy also lifted the TSE's banking index by 4.4 per cent, making it the second-biggest gainer among the bourse's 33 industry groupings. The central bank will meet on policy next week. BOJ Deputy Governor Shinichi Uchida said on Wednesday that the trade deal greatly reduces uncertainty over the economic outlook, but also warned that risks to activity and prices were skewed to the downside. "I don't think this (trade deal) alone will lead to a Bank of Japan rate hike next week, but the possibility of a rate hike between September and October has increased," said SMBC chief currency strategist Hirofumi Suzuki.
CNA
3 days ago
- Business
- CNA
BOJ warns of risks to economy, says rate-hike path on course
KOCHI, Japan :Bank of Japan Deputy Governor Shinichi Uchida said risks to economic activity and prices were skewed to the downside due to "extremely high" uncertainty over trade policy, even as he reiterated the central bank's readiness to proceed with further interest rate hikes. Uchida's remarks came hours after U.S. President Donald Trump announced a trade deal with Tokyo, a move that will likely ease some concerns over Japan's economic outlook. "Uncertainties surrounding each country's trade policy, and the effect on domestic and overseas economies, remain extremely high. As such, risks to economic activity and prices are skewed to the downside," Uchida said on Wednesday in a speech to business leaders in Kochi, southwestern Japan. "The BOJ needs to adjust monetary policy to best balance upside and downside risks from the perspective of maintaining economic and price stability," he added. The remarks from Uchida, who is known to deliver strong hints on the policy outlook, come ahead of the BOJ's July 30-31 rate-setting meeting when the board will issue a quarterly report with new growth and inflation projections. Sources have told Reuters the BOJ's report will warn of uncertainty over the impact of U.S. tariffs, but may offer a less gloomy view on the near-term hit to Japan's economy than three months ago when market volatility was at its peak. If some progress is made in Trump's trade negotiations with other countries, Japanese companies will likely enjoy strong profits and continue hiking wages, Uchida said. "But if the negative impact of tariff policies turns out to be greater or more prolonged than expected, the wage-hike trend seen in the past few years could weaken," he said. While warning of risks to economic growth, Uchida said inflation was running hotter than initially expected as rises in food costs were spreading beyond the price of rice. "This suggests that, at least with regards to food prices, firms' price-setting behaviour has changed significantly compared to the past," Uchida said, adding that rising food costs may have a relatively strong influence on households' inflation expectations. The BOJ expects underlying inflation, or price rises driven by strength in domestic demand, to reach its 2 per cent target around the latter half of fiscal 2026 through 2027, he said. While media reports that Prime Minister Shigeru Ishiba may step down could add to political uncertainty, receding worries about a U.S.-Japan trade deal led some analysts to predict the chance of another rate hike by the end of this year. "The trade deal with the U.S. announced today removes a key downside risk to Japan's economy," said Marcel Thieliant, head of Asia-Pacific at Capital Economics. "And while the potential resignation of Ishiba creates political risks, our conviction that the Bank of Japan will resume its tightening cycle before the end of the year has risen," Thieliant said. The BOJ exited a decade-long, radical stimulus programme last year and raised short-term interest rates to 0.5 per cent in January on the view that Japan was on the cusp of sustainably hitting its 2 per cent inflation target. While the central bank has signalled its readiness to raise rates further, concerns about the economic fallout from higher U.S. tariffs forced it to cut its growth forecasts in May and complicated decisions around the timing of the next rate increase. Key to the BOJ's rate-hike timing would be whether firms will continue to hike wages next year despite U.S. tariffs, and help underpin economic growth, analysts say.
