Of course the FED hiked 25bps as the markets had told them to. But they did surprise by talking further increases with a fully aligned committee backing Mr Warsh. After a brief whipsaw price action, markets actually cheered this news. Even gold rallied despite the potential increase in real interest rates.
From the Japanese perspective, the news was good. USD/YEN remained below US$155.00 and JGB yields fell with US treasury yields. But on Friday along comes the Bank of Japan monetary policy meeting. We know that communication blackouts exist before monetary policy meetings but that’s meant to be no comms coming out, not no news coming in. Surely the BoJ knew the news from the FED, watched the presser and observed the markets’ reaction?
Apparently not. With their usual fearful thinking they blew their big opportunity to hike bigger, or talk further hikes a la Warsh and, with a split vote (7-2), the committee was too scared to act positively. Needless to say bond yields (Japanese and US) rose back up to where they were before the FED and USD/YEN hit 158.00.
Having helped them try (almost succeeding) in strengthening the YEN, Bessent must be spitting teeth. And given his apparent predilection for physical violence, Mr Ueda should start growing a beard or wearing platform shoes.