Last Wednesday governor of BoJ had caused USD-JPY to plummet when he mentioned that the real yen (i.e. the level adjusted by price differences) was already very weak - implying that it did not have to depreciate any further. Today he explained though that his comment had merely referred to the real yen and had nothing to do with the nominal yen exchange rates.
The large majority of the moves in real exchange rates result from moves in nominal exchange rates. If the yen is to depreciate on an effective nominal basis, but not on a real basis that would only be possible if inflation in Japan was higher than in other countries it is trading with. However, that is exactly what the BoJ has been failing to achieve over the past 20 years, says Commerzbank. Kuroda can hardly want to convince us that inflation is going to take off in Japan as of tomorrow.
Aside from the curiosity of a central bank governor trying to take the market for a fool this leaves the realisation that Kuroda would like to undo the damage caused by his comments last week, which means that (a) he wants to prevent a stronger yen and that the BoJ (b) has not ended to target higher inflation rates (which yen strength would make impossible), argues Commerzbank.
