Haruhiko Kuroda, governor of the Bank of Japan, reacts during a news conference
at the central bank's headquarters in Tokyo. Photographer: Kiyoshi Ota/Bloomberg
(Bloomberg) -- Bank of Japan Governor Haruhiko Kuroda may spur a decline in the yen should he refute a report that the central bank is reluctant to expand monetary easing, Mitsubishi UFJ Morgan Stanley Securities Co. said.
The yen rose 0.4 percent on Friday, set for its second day of gains, while Japanese yields climbed after demand at a sale of five-year debt dropped to the lowest since April 2013 amid speculation the BOJ will avoid boosting stimulus. Traders will scrutinize Kuroda’s comments following a Feb. 18 meeting after Bloomberg News reported that policy makers deem further easing counterproductive, said Daisaku Ueno, chief currency strategist in Tokyo at Mitsubishi UFJ Morgan Stanley.
“The market’s expectations for a weak yen will revive if Kuroda clearly denies such a view and affirms his strong commitment to further easing as needed,” Ueno said. The dollar could rise above 120 against the yen if the U.S. economic outlook remains positive, he said.
The yen traded at 118.58 per dollar as of 2:09 p.m. in Tokyo from 119.11 on Thursday, when the currency gained as much as 1.6 percent following the Bloomberg report on the BOJ.
The yield on Japan’s 10-year bond rose as much as 3 1/2 basis points to 0.435 percent, the highest level since Dec. 8 and more than twice the record low of 0.195 percent on Jan. 20.
Another possible scenario next week is Kuroda will say that some of the central bank’s executive members were opposed to more easing because of the damage from further yen weakness, according to Ueno.
“The market shock from such an admission would strengthen the yen because it upsets the story so far of a weak yen bolstering stocks,” Ueno said. If Kuroda makes this comment, it would be very hard for the dollar to rise above the seven-year high of 121.85 yen reached in December, Ueno said.
The third possibility is that Kuroda will provide ambiguous comments at the press conference, forcing the market to speculate on the BOJ’s stance, Ueno said.
The dollar’s downside will probably be limited to 115.86 yen, the low so far for 2015, because the U.S. currency will remain underpinned by expectations the Federal Reserve will increase interest rates this year, Ueno said.
To contact the reporters on this story: Kazumi Miura in Tokyo at kmiura1@bloomberg.net; Chikako Mogi in Tokyo at cmogi@bloomberg.net
To contact the editors responsible for this story: Garfield Reynolds at greynolds1@bloomberg.net Naoto Hosoda, Jonathan Annells
