Yen roars, bonds flinch as Japan teases rates shift
By Marc Jones
LONDON (Reuters) — Japan's long-suppressed yen surged and global bond and stock markets flinched on Thursday, as Tokyo's monetary policymakers gave their clearest hints yet that the exit from ultra-low interest rates was approaching.
The yen rose 1.7% against the dollar, its biggest one-day jump since January, and at 144.80 to the dollar looked to be extending its post-COVID record of finishing years strongly. [FRX/]
The Nikkei's sharpest drop since late October ensured Asian stocks finished lower overnight while the FTSE 100 was flat, the DAX and CAC 40 dipped 0.2% and S&P 500 futures ticked 0.3% higher ahead of the Wall Street open. [.T][.EU][.N]
Bank of Japan Governor Kazuo Ueda had added to speculation about a shift away from negative rates by saying policy management would «become even more challenging from the year-end and heading into next year» and flagged several options of what could come next.
Money markets started pricing in a near 40% chance that the BoJ changes course at its final meeting of the year on December 19. Japanese government bonds also saw a sharp selloff, with yields on 10-yr JGBs jumping 11.5 basis points.
Societe Generale (OTC:SCGLY) strategist Kit Juckes said end of year yen rallies had become the norm since the pandemic but this move looked different and SocGen sees it as precursor for a strong move up next year.
«The yen is cheap as chips and it sounds like they (Japanese policymakers) have moved beyond the fact they are going to have to get rid of negative rates,» Juckes said.
«We have call of 130 (yen to the dollar) for the end of next year… as long as you think there is a bull market in U.S. Treasuries you are supposed to think there is a bull market in the yen too.»
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