With U.S. markets homing in on this week's critical August inflation update, Japan threw a curve ball into the piece by signalling a possible early end to its easy money stance just as other G7 central banks are mulling an end their tightening. In a weekend interview, Bank of Japan Governor Kazuo Ueda said the central bank could end its 7-year-old negative interest rate policy when achievement of its 2% inflation target is in sight - suggesting the BOJ is considering official interest rate hikes as well as an early end its bond-buying, yield cap policy. 'If we judge that Japan can achieve its inflation target even after ending negative rates, we'll do so,' Ueda said.
With U.S. markets homing in on this week's critical August inflation update, Japan threw a curve ball into the piece by signalling a possible early end to its easy money stance just as other G7 central banks are mulling an end their tightening.
The comments seemed to catch markets off guard, sending the 10-year Japanese government bond yield up more than 5 basis points to a 9-year high above 0.7%. The yen surged 1% against the dollar, knocking the U.S. currency back more generally on the foreign exchange markets. Critical for the Fed in its decision making next week will be two key data points - Wednesday's consumer price report and Thursday's retail sales.
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