USDJPY 5 mins
Bank of Japan board member Hajime Takata threw open the door to an interest rate hike and the end of negative interest rates in Japan.
His comments led to a nearly 50 pip drop in USD/JPY, easing the climb from earlier in the week.
He stopped short of committing to a change in policy but his comments are the strongest hint yet that officials plan to tighten policy and end negative rates.
he said that the achievement of the 2% inflation target was in sight.
“It’s necessary to consider taking a nimble and flexible response, including on how to exit, or shift gear from the current extremely accommodative monetary policy,” he said in a speech.
Takata also highlighted spring wage negotiations, an area that BOJ officials have said they’re watching for the past two months.
He said many companies are offering wage hikes higher than in the prior year and that inflationary momentum is rising in the negotiations.
The BOJ policy rate is currently -0.10% and most analysts expect a move to 0% but market pricing isn’t 100% until June. These comments don’t put a timeline on when rate moves could happen but certainly bias them towards sooner rather than later. Adding urgency is that the yen is close to multi-year lows and Ministry of Finance officials are increasingly using verbal intervention to stem yen selling.
Takata also highlighted concrete measures saying exit measures should include abandoning the yield curve control framework, ending negative rates and committing to overshoot on inflation.