BoJ’s Uchida turns down odds favoring early end to negative rates, defends YCC policy

Bank of Japan (BOJ) Deputy Governor Shinichi Uchida crossed wires via Japan’s Nikkei news, reported Reuters, as he ruled out an early end to the ultra-easy monetary policy while also defending the Yield Curve Control (YCC) policy.

BoJ’s Uchida cites current economic conditions while turning down talks of exiting negative rate policy.

“BOJ ‘strongly acknowledges’ the side-effects of YCC such as the impact on market function,” said Uchida per Nikkei reported Reuters.

It should be noted, however, that the policymaker also signaled the need for the bank to react to the signs of change in corporate wage and price-setting behavior.

BoJ’s Uchida was quoted saying that the risk of missing the opportunity to achieve our 2% target with a premature policy shift is bigger than that of being too late in tightening policy and allowing inflation to continue running above 2%.

USD/JPY implications

While the BoJ official tried to defend the Japanese central bank’s easy-money policy, the recent US data backs the odds of witnessing higher rates from the Federal Reserve (Fed). That said, market players expect the Fed to increase interest rates in its next policy meeting on July 26. The probability of a 25-basis-points rate hike is at 91.8%, according to data from the CME Group FedWatch tool, up slightly from 90.5% a day earlier.

Also read: USD/JPY Price Analysis: Pullback from YTD highs, intervention threats weight on the USD