Desirable for FX to move stably, reflecting fundamentals

Bank of Japan (BoJ) Governor Kazuo Ueda crossed the wires in the last hour, saying that the side effect of the Yield Curve Control (YCC) policy is greater market volatility.

Key Quotes:

• When BoJ talks about the side effects of YCC, it includes the risk of triggering volatility in markets including FX.
• Desirable for FX to move stably reflecting fundamentals.
• If YCC heightens FX volatility, that is seen as among the side-effects of our policy, when asked BOJ views sharp yen falls as a side-effect of YCC.
• Recent high inflation is driven by rising import prices and domestic factors, but the latter is still somewhat weak.
• Hope to see overall inflation slow as cost-push factors dissipate but in the medium- to long run, want to see inflation gradually accelerate.

Market reaction:

The Japanese Yen (JPY) reacts little to comments and continues to be weighed down by the BoJ’s dovish stance, allowing the USD/JPY pair to stick to its modest intraday gains just above mid-150.00s.

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