The Japanese Yen had a brief period of strength today which in typical fashion for 2023 failed to last. The Yen received a short-term boost on news that the BoJ may increase their inflation forecasts for 2023 and 2024 according to Bloomberg. The report stated the BoJ is expected to increase its 2023 forecast closer to 3% with the 2024 figure expected to be adjusted to 2% plus. The news was seen as a sign that the BoJ is growing in confidence that the wage growth targets the Central Bank has may be achieved sooner than expected. The idea is the sooner the wage growth target is met the quicker we may see policy pivot toward normalization. Japan’s Top currency diplomat Masato Kanda has been in the news of late with comments around FX moves following comments over the past two weeks warning of the potential for imminent FX intervention. As we have discussed of late Japanese authorities appear to be using comments as a mild form of intervention without actually committing to full on FX intervention as we had in 2022. This does appear to be working as Yen pairs have remined rangebound of late.
The ongoing Geopolitical tensions may be helping as well given the historic safe haven appeal of the Japanese Yen something which Kanda himself stated remain intact. Moving forward now the question I am left with is how much longer will the threat of intervention deliver the desired results?