Agency: The market misunderstood Kazuo Ueda’s inte

Aihucha News, September 11: Affected by Kazuo Ueda’s remarks, the Japanese yen and Japanese government bond yields rose today. Institutional analysts said that Kazuo Ueda's remarks did sound hawkish, but we believe that Kazuo Ueda's purpose was to cool down speculative selling of the yen. The yen has continued to weaken despite the Bank of Japan loosening its grip on the yield curve in July and the Ministry of Finance warning last week of sharp currency swings. The Bank of Japan is sensitive to a weaker yen because it would push up cost-driven inflation by raising import prices, undermining the demand-driven inflation outlook the central bank pursues. We believe the Bank of Japan is concerned about damaging secondary effects, whereby rising food and other commodity prices could spark public dissatisfaction and ultimately lead to government pressure on the central bank.