06:45 AM EST, 11/21/2024 (MT Newswires) -- The yen strengthened overnight Wednesday resulting in USD/JPY falling back below 155.00, said Mitsubishi UFG.

The yen strengthened following comments from Bank of Japan Governor Kazuo Ueda who stated that it isn't possible to predict the outcome of the December policy meeting. The governor said a lost of data must still be released before the BoJ makes its policy decision, MUFG wrote in a note to clients.

After the lack of a clear signal in a keynote speech from Governor Ueda at the start of this week over a December rate hike, market participants including MUFG had become more confident that the BoJ would wait until January of next year at the earliest to deliver another rate hike.

However, the comments overnight will breathe fresh life into speculation over an earlier hike before the end of this year providing more support for the yen, stated the bank. The governor also added that the policymakers at the BoJ "do take seriously into account exchange rate movements in forming our economic and inflation outlook, including the question of what's causing the exchange rate changes that are taking place at the moment."

MUFG forecasts the next BoJ rate hike in January but acknowledges that those plans could be brought forward if the yen continues to weaken sharply as it has done in recent months.

Kyodo also reported overnight that Prime Minister Shigeru Ishiba's cabinet is set to approve a 39 trillion yen economic support package including subsidies to offset high electricity, natural gas and gasoline prices and to deliver cash handouts to low-income households, pointed out the bank. It will include a plan to raise the tax-free income threshold which was a demand from the DPP party.

After losing their majority in the lower house of parliament, the LDP and Komeito have secured support from the DPP to pass the stimulus package.

According to the report, the cabinet plans to formalize stimulus measures on Friday with a plan to have a supplementary budget for the current fiscal year passed through parliament by the end of the year. The supplementary budget is expected to total 13.9 trillion yen. The economic support package is a supportive development for private consumption and will help keep the BoJ on track to keep raising rates.

Private consumption has proven stronger than expected in recent quarters and was boosted by a one-off income tax cut and higher wage growth in Q3, added MUFG.