MUFG’s Head of Research Derek Halpenny highlights renewed Japanese Yen underperformance as Prime Minister Takaichi nominates reflationist-leaning academics Toichiro Asada and Ayano Sato to the BoJ policy board. Markets price 15 bps of BoJ tightening for April, but MUFG warns that Deputy Governor Himino’s upcoming speech will be key for confirming that scenario and that failure to validate it could trigger further JPY weakness versus USD/JPY and broader G10.

BoJ appointments reinforce yen downside bias

"There is a clear underperformer today though (and yesterday) and that’s the yen with the government today announcing the picks to replace Asahi Noguchi at the end of March and Junko Nakagawa at the end of June."

"Asada is well known for his reflationist views having co-authored work with former deputy governor Wakatabe in the past."

"15bps worth of BoJ tightening is priced for April and whether that pricing is endorsed over the coming weeks will be crucial."

"If an April hike is being considered we would expect Himino’s tone to at least be consistent with that possibility."

"If he fails to do that there is an increased risk of further yen selling."

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