Yen dips on 'dovish' comments from BoJ chief

The Bank of Japan may be forced to consider easing monetary policy further if a stronger yen impacts on the outlook for inflation and the economy, the governor of its central bank said.

In response to a question from a lawmaker in Parliament, Haruhiko Kuroda said the BoJ had various options at its disposal, including lowering bond yields and increased asset purchases, Bloomberg reported.

Although currency manipulation was not one of the central bank's goals, in Kuroda's view, Japan's trading partners might not be as convinced if it acted to offset yen strength.

His remarks brought the dollar/yen cross off its session lows of 110.45 and as of 1055 GMT it was trading up to 110.75.

Yet according to analysts at MUFG, Kuroda did not give any clear indication that the BoJ was considering more stimulus in the near-term nor did it say it was "overly concerned" with gains in the yen.

Quite the opposite, the recovery in risk appetite and better news-flow around the ongoing US-China trade talks had seen it weaken since the 'flash crash' in dollar/yen at the start of 2019, the investment bank said.

Linked to the latter, also overnight Bloomberg reported that Japan's economy minister, Toshimitsu Motegi, had confirmed with the US Trade Representative, Robert Lighthizer, that Washington would not raise its tariffs on auto imports while trade talks were being conducted.

Motegi reportedly also said that the Japanese Prime Minister had confirmed with Donald Trump himself current exchange rates would remain at their current levels during the negotiations.

Nonetheless, MUFG analysts were downbeat, telling clients: "It remains concerning that global growth is continuing to slow and leading indicators are signalling further weakness ahead. It suggests that the recent yen weakening trend has been built on unstable foundations and is likely to be challenged in the coming months."