07:09 AM EST, 01/14/2025 (MT Newswires) -- USD/JPY declined into the New York close Monday on the back of United States tariff reports but then rebounded in response to the comments in a speech by Bank of Japan Deputy Governor Ryozo Himino, said Mitsubishi UFG.

This speech was the last scheduled speech by any senior BoJ official ahead of the meeting on Jan. 24 and as such was important for the financial markets, wrote the bank in a note to clients.

However, MUFG said the speech did not give a strong signal from Himino on the prospect of a hike being delivered at the meeting. Himino did state that the board "will have a discussion to decide whether to raise the policy rate or not, based on the outlook to be compiled."

Other comments from Himino certainly gave the impression that the broader economic conditions are in place and as such the justification to hike is there if a hike was agreed. He expressed confidence that wage growth this year would be as strong as last year and suggested U.S. President-elect Donald Trump's inauguration would give the BoJ a sense of the "broad direction of policies" going forward, stated MUFg.

Heimino also expressed optimism about the outlook for the U.S. economy. BoJ Governor Kazuo Ueda has previously stated that a positive wage outlook and some information on U.S. economic policy were required in order to hike again.

In a sense, it was difficult for the BoJ at this juncture ahead of inauguration to provide strong guidance on a rate hike so Deputy Governor Himino signaled as much as he could at this stage, added the bank. His speech didn't include a very clear and stronger signal of a rate hike next week but the speech also included enough to not rule out the possibility of a hike.

15bps is now priced implying a 25bps hike is 60% priced, according to MUFG. The BoJ's intent here may be to keep its options open and USD/JPY could play a role here.

A jump in USD/JPY and a move higher in U.S. yields on the back of tariff announcements after next Monday's Trump inauguration may be the green light for the BoJ to hike at next week's meeting.