Japanese yen jumpy after BoJ member urges tighter policy

• Japanese yen falls below 150
• BoJ’s Tanaka urges changes to monetary policy
• US PCE price index falls to 2.4%

BoJ’s Tanaka hints at tighter monetary policy

After close to two weeks of little movement, the Japanese yen is showing some volatility. The yen climbed as much as 1% on Thursday before paring much of those gains. USD/JPY has reversed directions on Friday and is trading in Europe at 150.59, up 0.40%.

The yen’s strong movement has come in the aftermath of comments from Bank of Japan board member Hajime Takata on Thursday. Takata said that the BoJ must overhaul is ultra-loose monetary policy, including an end to negative rates and removing bond yield control. Takata added that the BoJ was “seeing prospects of achieving our 2% inflation target”.

Takata’s hawkish comments are the latest sign that the central bank is close to unwinding its ultra-loose policy which could have a massive impact on the currency markets. The BoJ hasn’t provided any timelines for a change in policy, but the markets expect the Bank to lift rates out of negative territory at the April meeting.

Let’s not forget that when the yen trades around the 150 level, there are rumblings out of Tokyo that it may have to intervene to prop up the yen. Sure enough, Japan’s top currency diplomat, Masato Kanda, said on Thursday that policy makers were concerned with recent currency moves and stood “ready to ready to respond appropriately if we see excessively volatile moves.”

In the US, the Federal Reserve’s preferred inflation indicator, the Personal Consumption Expenditures Price index, slowed to 2.4% in January, matching the market estimate. This was down from 2.6% in December and the lowest rate since February 2021, further evidence that inflation continues to fall. Monthly, the PCE price index rose 0.3%, up from a revised 0.1% in December and matching the market estimate. The upswing was a result of higher services prices.

USD/JPY Technical

• USD/JPY is putting pressure on resistance at 150.74. Above, there is resistance at 151.47
• There is support at 149.97 and 149.24

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