BNY’s Head of Markets Macro Strategy Bob Savage flags that USD/JPY is firmer as BoJ Governor Ueda reiterates accommodative policy and markets price a modest rate hike. At the same time, Japan’s consumer confidence has fallen sharply, with over 90% of households expecting higher prices, underscoring domestic headwinds even as foreign demand for capital goods improves.

Accommodative BoJ versus soft domestic data

"The BoJ Governor Ueda noted that policy is accommodative and that fiscal spending could crowd out private investments."

"His speech left the market expecting a hike to 1% later this month."

"Japan’s March consumer confidence index fell by 6.4 points m/m to 33.3, marking the first decline in three months and prompting a downgrade in the overall assessment to weakening, with all key components deteriorating including livelihoods (-9.8 points), employment (-5.7 points), income growth (-2.5 points) and willingness to buy durable goods (-7.7 points)."

"Inflation expectations remained elevated; over 90% of respondents anticipate price increases over the next year, with the share that expects price hikes of more than 5% increasing by 16.9 points m/m."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)