Fukui: Rates Not Dependent on Prices

Speaking at the post BOJ rate announcement press conference Governor Fukui noted that the BOJ rate policy is not predetermined and the central bank may decide to raise rates even of the price level increases drags behind the growth of the economy. At the same time BOJ chief reiterated his earlier comments that any rate hikes will be gradual. Nevertheless, despite continued neutral stance on monetary policy Japanese authorities appear to be signaling to the market that they are uncomfortable with the one way action of the carry trade which has dropped the USDJPY exchange rate to near 120. Therefore with BOJ now fully confident that Japan’s recovery is sustainable, today’s commentary to the market suggests that the monetary authorities may begin shifting their attention to exchange rates and will act accordingly if yen weakness begins to exceed their parameters.