Stocks and the Japanese Yen fall as governor speculation persists.
The Japanese yen lost 0.6% of its value against the US dollar on Monday. The stock index fell about 1% for the day on the local stock market, which also plummeted.
Uncertainty Regarding BOJ’s Monetary Policy
The market’s main concerns were the rumors around the Bank of Japan’s next governor and the sustainability of the bank’s ultra-loose monetary policy. A reputed outsider to Japan’s political system, Haruhiko Kuroda, was reportedly in the running for governor on Friday.
Support for a Very Flexible Policy
Haruhiko Ueda, who is anticipated to be nominated, recently stated that the BOJ’s ultra-accommodative policy did not need to be changed. This news tempered hopes for a quick change in the BOJ’s ultra-dovish stance, despite the nation’s rising inflation and declining currency.
Progressive Change in Monetary Policy
According to reports on Monday, Ueda would probably abandon the BOJ’s ultra-dovish strategy gradually. Inflation and wage growth will play a bigger role in deciding monetary policy, according to analysts at ING. This has caused inflation to hit 40-year highs combined with increasing raw material costs.
Policy Tightening Speculation
With inflation already above the BOJ’s 2% annual objective, speculation over when the BOJ would start tightening its policy is rising. The central bank unexpectedly expanded the range of rates on benchmark government bonds in December, which raised expectations for more tightening. The BOJ did not, however, follow through on anticipation for more measures in January, which raised market volatility locally.
Japanese stock market impact
Japanese equities have fallen recently as a result of concerns over the impending end to the BOJ’s supportive approach. Local stocks may no longer benefit from the strong liquidity environment that existed earlier and supported them for over a decade.