Traders are getting nervous as signs of BOJ pivot start showing

After the start of trading on Monday, the yen rapidly soared, triggered by speculation of a possible Bank of Japan pivot towards a more hawkish attitude. The rumors were caused by a report on potential changes that might be made to a key agreement between the Japanese government and the country’s central bank.

The yen demonstrated sharp growth soon after the release of news that Prime Minister Fumio Kishida intends to review an accord with the central bank of Japan that was signed nearly ten years ago. Adding flexibility to the 2% inflation target was mentioned as one of the possible changes to the accord. The yen then showed some decline after the information was denied by a government representative.

Recent remarks from the officials are now heating the rumors of a probable change in the Bank of Japan’s policy after its head Haruhiko Kuroda leaves the post in April. As it was said by Kishida’s aide, reaching a new accord with the Bank of Japan is quite possible.

Rodrigo Catril, a currency strategist at National Australia Bank in Sydney, noted that the news showed how the country’s government is concerned by the yen’s depreciation. According to Catril, Japan will get a chance to reset its policy in 2023, probably allowing a more flexible approach to reaching the central bank’s goals.