Yen Weakens as BOJ Hints at Faster Rate Hikes
The global economy experienced significant shifts in sentiment and market performance last week. The Japanese yen weakened sharply, with analysts attributing this to the Bank of Japan's (BOJ) September Summary of Opinions, which hinted at further rate hikes. The BOJ's hawkish tilt indicated that some members are open to faster increases if inflation surpasses 2%. In contrast, a couple of members favored holding off on rate hikes due to CPI remaining below 2%.
Meanwhile, the Nikkei 225 surged 2.5%, driven by Micron's strong earnings and Trump's announcement that South Korea plans to invest $200 billion in US energy projects. Asian equities were generally firmer, with the KOSPI gaining 0.9% on tech-related buying.
Oil executives expect WTI crude prices to reach near $88 by year-end, below current levels, according to a Dallas Fed survey. In contrast, the BOJ's tankan showed big manufacturers' sentiment at +24 and big non-manufacturers at +35. Firms anticipate consumer prices rising an average 2.6% annually from now.
Fed's Kashkari expressed concerns about inflation remaining too high around 3%, predicting one more rate hike this year and another in 2027.