EUR / JPY Exhibits a V-shaped Movement As BoJ Udea Cites The Appropriateness Of Current Monetary Policy

When Bank of Japan (BoJ) Governor nominee Kazuo Ueda addresses the Japanese parliament, the EUR / JPY currency pair has exhibited a V-shaped move. The commentary from the successor of BoJ Governor Haruhiko Kuroda has accelerated volatility in the Japanese Yen.

BoJ Ueda's speech appears more diplomatic as he describes the current monetary policy as appropriate and necessary to maintain 2% inflation. Moreover, he stated that Japan's increasing inflation is a result of rising import prices. Domestic demand is still lacking, but the central bank is making endeavors to reach pre-pandemic growth levels. The neighborhood has descended into insanity as a result of the absence of Yield conversion control (YCC) discussions in his speech.

Despite current discussions about the widening of the YCC, the economic prognosis for the Japanese Yen is positive, as the Bank of Japan is working to increase labor costs, which will confidently support a revival in overall demand.

Nordea economists continue to be confident on the Japanese Yen: "We remain fairly optimistic on JPY due to our expectations of a change in BoJ monetary policy later this year." The time should be opportune for a normalization of the Bank of Japan's stimulative monetary policy, according to a note from Nordea, "With inflation reaching its highest level in decades and an outlook for higher wage growth."

Despite alleviating inflationary pressures, investors are concerned that normalization of the Eurozone economy will take a considerable amount of time. The European Central Bank (ECB) is expected to continue hiking interest rates to keep a cap on the price index.