Japanese Central Bank Lacks Urgency to Raise Rates, Supporting Carry Trades

The Bank of Japan's latest meeting was not positive for the yen, and global carry trades again have conditions to be implemented. According to Sina Finance, although the central bank delivered the policy tightening called for by U.S. Treasury Secretary Scott Bessent and already priced in by traders, several factors remained negative for the yen: two policy board members opposed the rate hike, no one called for a larger increase, and the bank's statement promised further hikes without giving a timetable, failing to signal urgency. Japan's benchmark rate remains far below the neutral rate, and unless hikes continue, the yen's weakness is likely to persist. Among Group of Ten economies, only the Swiss franc currently has a lower rate, and the Swiss National Bank will meet next week. If the Swiss National Bank reiterates its preference to keep rates at zero, exchange-rate volatility for the two main funding currencies is likely to remain low. After a series of central bank meetings, Brent crude may post its first weekly decline this month, while deeply oversold global bonds have found some relief. The Bank of England plans to pause bond sales and stop disposing of securities maturing in 2049 and later, a move that has supported long-dated U.K. government bonds. Thirty-year U.K. government bonds are set to benefit significantly, although the upcoming autumn budget may limit gains, and Thursday's rally is likely to continue.