Shigeta Kazuo, the "hawk" can't fly? Analysts: Takashi Wanasae's doves in power, yen arbitrage frenzy continues.

The decision of the Bank of Japan to keep the policy interest rate unchanged further strengthened market expectations that under the leadership of Prime Minister Takaichi Saanae, the monetary tightening policy will be cautiously implemented. This directly led to a decline in the yen and provided support for Japanese government bonds. It was disclosed that only two board members supported a rate hike at this monetary policy meeting, and investors generally interpreted this result as a dovish signal, closely monitoring the subsequent speeches of Bank of Japan Governor Ueda Haruhiko for clues on policy direction. Analysts generally believe that due to the Bank of Japan's stable inflation forecasts and the stable voting results, the possibility of a rate hike before 2026 is low. Market strategists had varying reactions to this. Park Jong-hyun, head of research for Standard Chartered Bank in Korea and Japan, pointed out that if the market formed a consensus that the Bank of Japan would maintain low interest rates in the long term, short positions on the yen could further accumulate. He emphasized that with the loose monetary policy of the Federal Reserve, the difficulty of Japan raising interest rates would significantly increase, and officials may remain cautious about macroeconomic risks in the United States. At the same time, the risk-return ratio of the yen as a funding currency for arbitrage trades may deteriorate, as any interest rate hike by the Bank of Japan is always a "real-time decision," with variables present at each meeting. Carol Kong, a strategist at the Sydney branch of the Commonwealth Bank of Australia, emphasized that Governor Ueda Haruhiko would only release a stronger signal for a rate hike after obtaining government approval. She stated that although the market continues to search for the timing of the Bank of Japan's next rate hike, this policy statement and outlook report did not provide clear clues, so attention should be focused on Governor Ueda Haruhiko's press conferencesespecially regarding communication with the Takaichi Saanae government, as the new government leans towards a dovish stance on monetary policy. Without a clear signal, Governor Ueda Haruhiko may reiterate the established position of "raising rates only after economic prospects are realized." Felix Ryan, a strategist at ANZ Bank, believed that the Bank of Japan's cautious approach to monetary policy normalization could keep the yen against the dollar below the 150 level. He expected Governor Ueda Haruhiko to emphasize a "data-dependent, gradual rate hike" cautious attitude and pointed out that in the context of a reassessment of the Federal Reserve's policy outlook, the dollar/yen exchange rate may continue to fluctuate at high levels in the short term, with market pricing adjustments supporting exchange rates above 150. Alex Lu, a macro strategist at Nomura Securities, pointed out that the Bank of Japan's policy statement this time was highly similar to the previous one, which may disappoint yen bulls when it comes to Governor Ueda Haruhiko's subsequent speeches. The market had expected him to release a hawkish signal on Halloween night, but historical records show that Governor Ueda Haruhiko is more inclined to a dovish stance. It is worth noting that although only two members opposed maintaining the status quo this time, the market speculates that there may be more dissenting voices, underscoring the Bank of Japan's intention to normalize interest rates under a dovish prime minister. Hiroshi Bokuge, Chief Strategist at T&D Asset Management, said that the Bank of Japan's policy decision is in line with market expectations for a dovish monetary policy under the leadership of Takaichi Saanae, which may provide some relief for the Japanese stock market. Although it was generally believed that a rate hike in December was possible, with only two board members opposing the status quo this time, it was seen as a dovish signal and triggered a selloff of yen. David Forest, Senior Forex Strategist at Crdit Agricole, believed that although the decision to maintain interest rates slightly exceeded expectations, market support for the low interest rate environment continued to pressure the yen, leading to a slight rebound in the dollar against the yen. He emphasized that only two members, Tamura and Takada, opposed a rate hike, and with only minor adjustments to inflation forecasts, it indicates that the Bank of Japan will resume the rate hike process in the coming months.