As central banks in Europe, America, and Japan gradually approach the turning point of early 2024, the market is becoming increasingly enthusiastic about interpreting the "hidden implications" of monetary policy officials.
On Monday, December 25th local time, Bank of Japan Governor Kazuo Ueda attended the Keidanren event, Japan's largest economic organization, and delivered his final speech on the 2023 schedule. It is worth mentioning that Fumio Kishida, who has been busy dealing with cabinet "political funding" issues in recent days, also attended today's meeting and shouted that Japan is currently in a "once in a lifetime" opportunity to exit deflation.
In line with the Prime Minister's words, the Governor of the Bank of Japan also stated in his speech that the most obvious benefit of slightly improving inflation for monetary policy is that it has greater room to respond to economic downturns.
In response to the most influential group in the Japanese business community, Kazuo Ueda emphasized that improving economic stability by ensuring space for monetary policy response will have a significant positive impact on businesses formulating business plans.
It should be noted that as of the end of 2023, the "monetary policy space" mentioned by Kazuo Uchida may only be a concept. The Bank of Japan has been maintaining its "negative interest rate" policy since 2016. The last time this central bank raised interest rates was in 2007.
According to an earlier survey, two-thirds of economists predicted that the Bank of Japan will raise interest rates/end negative interest rates by April next year, with 15% of radicals believing that they can "witness history" next month.
Uchida and Kazuo also stated on Monday that the next key factor affecting monetary policy will be salary negotiations in the spring of next year, especially whether Japanese workers can continue to receive "substantial" salary increases. The Governor of the Bank of Japan stated that if the likelihood of achieving a stable and sustainable 2% inflation target significantly increases, the Bank of Japan is likely to consider changing its monetary policy.
It is worth mentioning that monetary policy officials in Japan, including Kazuo Uchida and Ryozo Himino, Deputy Governor of the Bank of Japan, have recently repeatedly looked forward to the future of the "post negative interest rate era".
Is Japanese yen reserved for popular transactions in 2024?
As the Federal Reserve gradually moves towards a rate cutting cycle and the Bank of Japan approaches rate hikes, the opposite direction of monetary policy has also made buying the yen a direction that more and more traders are considering.
Starting from the Federal Reserve's interest rate hike in March 2022, the US/Japanese currency pair has risen from around 110 to around 150. Once the Federal Reserve starts cutting interest rates and the Bank of Japan starts raising them, it will be natural for the yen to be among the top performers on the 2024 asset growth chart.
The US Commodity Futures Trading Commission's data as of last Tuesday also showed that asset management companies have reversed their bullish stance on the yen for the first time since May this year. Hirofumi Suzuki, Chief Foreign Exchange Analyst at Sumitomo Mitsui Bank, commented that even with the Bank of Japan's policy actions remaining unchanged in December, asset management agencies may maintain their long positions in the yen, as there are speculations that there may be actions at the Bank of Japan's monetary policy meeting in January.
At the same time, not only traders are excited about the normalization of Japan's economy and monetary policy, but securities firms are also eagerly anticipating the upcoming year 2024.
Alberto Tamura, CEO of Mitsubishi UFJ Morgan Stanley Securities, told the media last week that the relaxation of bond yield controls by the Bank of Japan in recent quarters is helpful in activating the fixed income market. If the central bank subsequently abolishes negative interest rate policies, it will further stimulate more customer activity. At the same time, international clients are becoming increasingly interested in the Japanese market, driving the growth of stock trading.
Tamura also expects that this fiscal year (ending at the end of March next year) may be the highest revenue year for Mitsubishi UFJ Morgan Stanley Securities.