TOKYO - The yen opened the week higher after Kyodo News reported that Japanese Prime Minister Fumio Kishida was planning to revise a 10-year-old accord with the Bank of Japan (BOJ), with the potential to add flexibility around the 2 per cent inflation goal.

The currency strengthened as much as 0.6 per cent early on Monday to 135.79 per US dollar as traders got their first chance to respond to the comments reported by Kyodo last Saturday, citing unidentified government sources. Should these be confirmed, they would contrast with comments from Mr Kishida in June, when he said he expected the BOJ to stick to its 2 per cent inflation target. 

The yen has been the worst-performing major currency in 2022 as BOJ governor Haruhiko Kuroda’s insistence on buying massive amounts of government bonds meant Japan’s yields stayed low, while they soared elsewhere as other global central banks started hiking interest rates to combat inflation.

Kyodo said Mr Kishida would discuss the matter with the next BOJ governor, who will succeed Mr Kuroda in April.

Last week, Bloomberg reported that BOJ officials saw the possibility of a policy review in 2023, after wage growth and any slowdown in the global economy are closely examined, according to people familiar with the matter.

Investors like Fidelity International and T. Rowe Price all favour the yen after it was bludgeoned to the weakest level in three decades of 151.95 per dollar earlier this year.

The authorities look to be defending the Japanese currency at around 145 per dollar and “it seems that the sweet spot for them, at least at this point, seems to be the 120, 130 kind of level”, said Mr Omar Slim, who helps manage PineBridge’s Asia Pacific Investment Grade Bond Fund.

Mr Slim is negative on Japanese bonds, whose yields have been kept artificially low for years to keep borrowing costs at rock bottom. BLOOMBERG