Mover alert: Nikkei225 cracks below 36,000 level while yen trades to highest level this year on new comments by BOJ board member

– The Nikkei225 September futures has been trading resolutely below the 36,000 level since 11AM, after comments by Bank of Japan (BoJ) board member Junko Nakagawa that "the degree of monetary easing will be adjusted if the outlook for Japan’s economy and inflation is realized”.

– While the remarks were largely in line with the BOJ’s standing policy stance, they came at a time when investors are intensely focused on the narrowing of the interest rate gap between Japan and the US — and just as Democrat Kamala Harris and Republican Donald Trump sparred in their first debate. (Bloomberg)

– Consequently, the yen traded to its highest level this year - 140.71 against the US dollar, while the Nikkei225 September futures index moved 2% lower to trade at 35,260 as of 130PM. The futures index has since rebounded to 35,790 as of 4PM.

– While many expect the BoJ to hold interest rates steady at its meeting next week (and expect them to wait until December or January 2025 before its next rate move), Nakagawa’s comments serve as a reminder that rate hikes at a later date are still in the pipeline should the economy and prices continue in line with forecasts.