06:24 AM EST, 11/18/2024 (MT Newswires) -- The yen (JPY) weakened modestly at the start of this week resulting in USD/JPY rising back above 155.00, said Mitsubishi UFG.

It follows the much-anticipated speech overnight Sunday from Bank of Japan Governor Kazuo Ueda. It was his last major speech before the BoJ's final policy meeting of this year on Dec. 18-19, wrote MUFG in a note to clients.

Market participants were watching closely to see if Ueda would clearly signal that the BoJ is planning on raising rates one more time this year, stated MUFG. However, the governor didn't oblige. Ueda stated that "the actual timing of the adjustments will continue to depend on developments in economic activity and prices as well as financial conditions going forward."

When asked about the possibility of a rate hike at the next policy meeting he stated "for the December meeting, for example, we will make the right policy decision at that time and adjust our outlook as needed for assessing risks and additional information that we've gathered since the October meeting." The governor reiterated though that if the BoJ's outlook for economic activity and prices are realized, it will continue to raise rates.

At the BoJ's last policy meeting, Governor Ueda emphasized that it's no longer necessary for the bank to say it had "time to mull" before making further policy adjustments. It sent a signal to market participants that the hurdle to another rate hike had diminished.

However, based on comments overnight from Governor Ueda it appears unlikely that the next rate hike will be delivered as early as next month given that BoJ is placing even more importance now on flagging policy adjustments in advance to help dampen market volatility, pointed out MUFG.

While it doesn't completely rule out a rate hike in December, the yen would have to continue to weaken sharply to prompt the BoJ to bring forward rate hike plans. At the moment, the BoJ appears comfortable enough with the recent yen price action and the comments from Governor Ueda will encourage market participants to keep selling the yen heading into year-end.

Yet the risk of intervention and/or the BoJ hiking rates earlier to support the yen would rise if USD/JPY continued to rise sharply up towards the year-to-date highs at just above the 160.00 level, added the bank.

Overall, the comments from Governor Ueda fit with MUFG's forecast for the next rate hike to be delivered in January. The BoJ will have been encouraged by the release of the latest gross domestic product report released last week that revealed much stronger than expected private consumption growth in Q3. Private consumption growth picked up to 0.9% quarter over quarter in Q3 from 0.7% in Q2. The strongest two-quarters of personal consumption growth since Q2 and Q3 2022.

It should give the BoJ more confidence that stronger wage growth is helping to boost consumption, and will help to maintain higher inflation, according to MUFG.