The yen was rocked by the Japanese PM’s “inappropriate” comments by Reuters

By Jamie McGeever

(Reuters) – A look at the day ahead in Asian markets.

Japanese markets, especially foreign exchange markets, continue to digest new Prime Minister Shigeru Ishiba’s rather blunt comments on monetary policy after he met with Bank of Japan Governor Kazuo Ueda on Wednesday.

“I don’t think we’re in an environment that would require us to raise interest rates any further,” Ishiba said, triggering a huge yen selloff.

The yen fell nearly 2 percent against the dollar on Wednesday, its biggest drop since February last year. Excluding pandemic-related volatility in March 2020, it was one of the steepest declines in over a decade.

Meetings between Japan’s prime minister and central bank governor are not unusual, but this one came just days after Ishiba took office. His comments were also unusually blunt — “somewhat inappropriate,” according to Washington economist Phil Suttle.

Analysts at JP Morgan believe the Ishiba administration will adopt a “market-friendly” policy stance until next summer, when upper house elections are scheduled, which should calm market concerns about growth.

The yen’s decline reflects how extreme market positioning has become. U.S. futures market data shows that hedge funds hold the largest “long” position in the yen since 2016 and one of the largest so far.

Asahi Noguchi, a dovish BOJ board member who opposed the central bank’s interest rate hike in July, is giving a speech on Thursday and holding a news conference where he is likely to be asked about Ishiba’s comments.

Elsewhere in Asia, Thailand’s Finance Minister Pichai Chunhavajira and Central Bank Governor Sethaput Suthiwartnarueput speak at a central bank event on Thursday.

Asia’s economic calendar sees the release of purchasing managers’ index data from Australia and Singapore and the latest international trade figures from Australia.

The dollar’s rise against the yen and U.S. economic data on Wednesday helped lift the greenback to a three-week high against a basket of currencies and its third daily gain of about 0.5 percent.

Rising tensions between Iran and Israel continue to support safe-haven demand for the dollar and a rebound in oil prices. rose above $76 a barrel for the first time in a month, but ended the day up only about 1%.

Investors will also weigh news that France, Greece, Italy and Poland will vote Friday in favor of steep tariffs of up to 45 percent on imports of electric vehicles made in China. This could lead to the application of the European Union’s most important trade measures, risking potential retaliation from Beijing.

How will Germany vote? Finance Minister Christian Lindner said the country must oppose the EU proposal, adding: “A trade war with China would do us more harm than good for a key European industry and a crucial sector in Germany.”

Here are the key developments that could provide more direction for Asian markets on Thursday:

– trade with Australia (August)

– PMI Japan, Australia, Singapore (September)

– Hong Kong retail sales (August)