In response to media reports about who will succeed the current Governor of the Bank of Japan, Haruhiko Kuroda, who leaves his position in April of this year, the yen has reinforced its position across the market today.
Amamiya is no longer a contender.
Today, the final trading day of the week, was the scheduled day for the formal announcement of Kuroda's replacement. The administration would present a similar candidacy to parliament on February 10 according to the Prime Minister of Japan. The officials, however, abruptly changed the date of this event to February 14.
It is well known that Masayoshi Amamiya, the current deputy of the Central Bank who has been employed by the Bank of Japan system since 1979 and who was named deputy leader five years ago, was one of the front-runners in the election race. He declined, though, so the administration was forced to choose a replacement.
Amamiya has always backed Haruhiko Kuroda's judgments because he is one of his supporters and is in favor of the "dovish" policy. Any radical changes in the policies of the Japanese regulator in the near future would not have been anticipated if he had decided to accept the position of head of the Central Bank.
The yen received strong support simply because Masayoshi Amamiya rejected the suggested position; the USD/JPY pair fell from the 131.58 level to the target of 129.84 in a matter of hours (followed by a northern pullback).
Hiroshi Nakaso, who had previously served as the deputy governor of the Bank of Japan, was another favorite in the election battle. He is regarded as a "hawk."
But there is further data as well. So, the administration of the nation will present to parliament the candidacy of economist Kazuo Ueda, who was formerly a member of the Governing Council of the Bank of Japan and claims an insider of the prestigious Japanese journal Nikkei Asia.
Kazuo Ueda, who is he?
It's important to note that Ueda's name was only infrequently discussed among Kuroda's potential successors. Investors were therefore taken aback by the sudden change in the plot; currency experts, of course, are now hurriedly analyzing the remarks they made earlier to assign him a conditional "classified" in the context of his hawkish or dovish views.
There is currently no market agreement about the new nominee, but most analysts believe that Ueda's attitude varies from Kuroda's in that he is less conservative and, as a result, can bring about changes in the Central Bank's policy. At the same time, practically all observers are certain that no "ultra-hawkish" move should be anticipated in any event; even if the Bank of Japan decides to change its current policy under the incoming chairman, the associated procedures will be extremely smooth.
Let me remind you that the regulator increased the range of yield variations on 10-year government bonds in response to the outcomes of the Japanese Central Bank's meeting in December. This choice was made just before Haruhiko Kuroda tendered his resignation, which was entirely unexpected. As a result, the market gave a very clear interpretation of the meeting's outcomes and concluded that the Central Bank had begun the process of normalizing monetary policy. Since then, the market has given equal attention to the possibilities for the Fed's monetary policy and the prospects of a 180-degree turn in the Japanese Central Bank's monetary policy.
Because of this, the yen is extremely sensitive to any more or less substantial information on Kuroda's successor.
Conclusions
Please take note that the USD/JPY pair originally stalled before rolling back to the area of the 131st figure following a sudden price decrease of more than 150 points. This implies that short positions on the pair right now are very dangerous.
First off, no one has been named as a potential replacement in an official capacity. Although the Nikkei Asia edition is very reliable, several analysts advise treating early media stories about staffing changes at the Bank of Japan with caution. The information that is leaked to the media may have unwarranted repercussions for the government: in the past, the government has nominated alternate candidates in the face of intense criticism of the candidate who was "announced" by journalists.
Second, Kazuo Ueda, who has recently performed in public only occasionally, continues to be a contender. Thus, it is at the very least early to discuss his "hawkishness".
From this, it can be concluded that the USD/JPY pair only received support because Masayoshi Amamiya, a proponent of the "dovish policy," was not included on the list of potential candidates for the position of governor of the Bank of Japan. However, a mystery about Kuroda's potential successor will persist until February 14. Any southern or northern price movements of the USD/JPY will thus be temporary. Given the high level of uncertainty, it is anticipated that the pair will vary till Tuesday in a wide price range between 130.00 and 132.00 (the marks correspond to the lower and middle lines of the Bollinger Bands indicator on the D1 timeframe).
