USD/JPY rebounded above 146 after Deputy Governor Uchida stated that the BOJ won’t raise rates when market is unstable. That said, markets should refrain from bidding USD/JPY back above 150, DBS FX & Credit Strategist Chang Wei Liang notes.

Political environment turns averse towards a weak JPY

“The sharp unwind of carry trades triggered by uncertainty over BOJ’s policy rate trajectory has entered an uneasy pause.” 

“Indeed, USD/JPY rebounded above 146 after Deputy Governor Uchida stated that the BOJ won’t raise rates when market is unstable, making clear that financial stability is part of its policy consideration. The Nikkei index has also rebounded about 11% from its low since Monday.” 

“That said, markets should refrain from bidding USD/JPY back above 150. Japan’s political environment has turned increasingly averse towards a weak JPY, and the BOJ remains concerned about any inflation pass throughs from the exchange rate.”