Traders have been perplexed over the past week as to when the Bank of Japan may hike rates following comments from officials and media reports that have sent mixed signals of the central bank's intentions.
The confusion has caused sharp swings in market bets on rate hikes, with overnight indexed swaps pricing in a 22% chance of a December rate increase, tumbling from 60% at the beginning of last week. The yen has weakened to as low as ¥152.18 per dollar this week from ¥150 last Friday, and was trading at ¥151.73 at 10:40 a.m. in Tokyo.
BOJ Gov. Kazuo Ueda’s remarks in a Nikkei interview last month that hikes are "nearing” were followed a few days later by a Jiji Press report highlighting growing concern inside the central bank about a premature rate hike. Dovish policy board member Toyoaki Nakamura said last week that he doesn’t object to a rate hike but would have to look at data to decide on policy this month.
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