The Japanese share index rallied by almost 2% on Monday after Prime Minister Sanae Takaichi raised concerns with the BOJ about further rate hikes.
JPN 225 – Daily Chart
The JPN 225 has surged from support at the 56,672 level to push for the all-time highs once again. That gives traders two key levels for a larger move.
The market move was driven by a slump in the Japanese yen, which Nikkei Asia said was the result of FX intervention by US Treasury Secretary Bessent, not Tokyo. FX traders took this as evidence that Japanese authorities had been prepared to allow the USDJPY to continue climbing.
Then yen had previously been weakened by reports that China had added 20 Japanese firms, including affiliates of Mitsubishi Heavy Industries, to an export control blacklist.
But a third drop sent the USDJPY above 156, after Japan’s Mainichi daily reported that Japanese Prime Minister Sanae Takaichi had spoken to the BOJ about her reservations over additional interest rate hikes.
If the report is true, it could mean growing friction over monetary policy between the central bank and the Prime Minister.
The Japanese bond market had been showing signs of stress in previous months, but rising inflation had forced the Bank of Japan to begin a rate hike cycle. A Reuters poll earlier this month showed that a majority of economists expect the BOJ to raise its key interest rate to 1% by the end of June. Some analysts expect a first move as early as April due to rising inflationary pressures and the weaker yen.
