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By Gregor Stuart Hunter
SINGAPORE (Reuters) – The yen firmed against the dollar on Friday after the Bank of Japan’s decision to hold rates steady came with two dissenting votes calling for a hike, even as it unveiled plans to sell holdings of exchange-traded funds and real estate investment trusts.
The board dissent at the BOJ came as a surprise, unsettling investor sentiment after the Federal Reserve’s rate cut this week.
“This was unexpected, and suggests that perhaps policy rate hikes may be coming sooner than anticipated,” said David Chao, global market strategist for Asia-Pacific at Invesco in Singapore. The central bank’s next meeting on October 30 will now be a live meeting, and “the best chance for a rate hike for the rest of this year,” he added.
In a volatile session after the BOJ decision, which saw the board maintain interest rates at 0.5%, the yen surged initially but later pulled back. It was last 0.1% up against the dollar at 147.90 yen.
“While it’s not unusual for board members to dissent when policy is changed, dissents are less common when policy is being kept unchanged,” analysts from Capital Economics wrote in a research report. “Certainly dissents by two board members are very unusual.”
The decision comes after data released earlier on Friday showed core consumer prices in Japan rose at their slowest pace in nine months. Market attention is now focused on Governor Kazuo Ueda’s press conference for clues on the path of monetary policy, who is speaking against the backdrop of the LDP’s leadership election to decide who will replace outgoing Prime Minister Shigeru Ishiba.
Veteran Japanese lawmaker Sanae Takaichi, a fiscal dove who is vying to become the country’s first female prime minister and is seen as one of the frontrunners in the race, said she planned to work on a mix of income tax cuts and cash payouts to households. Across the broader currency market, traders are weighing the long-term economic impact on the dollar, the preeminent global reserve currency, from the Trump administration’s barrage of tariffs on imported goods from overseas and a wider shake-up in policymaking.
The U.S. Supreme Court on Thursday set a date of November 5 for arguments it will hear concerning the legality of Trump‘s global tariffs in a major test of one of the Republican president’s boldest assertions of executive power that has been central to his economic and trade agenda.
Trump has also repeatedly criticised the Fed for not cutting rates quickly and more deeply, stoking concerns about the independence of the U.S. central bank.
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