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IMF chief economist Pierre-Olivier Gourinchas spoke at the Jackson Hole annual economic symposium on Friday. Gourinchas said that the Japanese central bank can continue to raise rates gradually, at a data-dependent pace, per Reuters.  Key quotes Inflation is higher than the bank’s 2% target.Inflation expectations have started to move “maybe even a little bit above” that targetBOJ’s beginning to normalize monetary policy is “certainly something that we think is a good development for Japan. Market reaction At the time of writing, USD/JPY is trading 0.40% lower on the day to trade at 143.78. Japanese Yen FAQs The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors. One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the…

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Filed under: News - @ August 26, 2024 12:55 am