(News Bulletin 247) – The Japanese currency gained more than 1% against the dollar in the middle of the afternoon on Tuesday, after the governor of the Bank of Japan reiterated that the institution would raise its rates if the economy behaves as he expects.

The yen is still experiencing a major bout of volatility. The Japanese currency is moving sharply higher on Tuesday after the governor of the Bank of Japan (BoJ) reiterated that the institution would raise its rates if the economy evolves in line with its expectations.

Around 4 p.m., the yen jumped 1% against the dollar and 1.3% against the euro.

BoJ Governor Kazuo Ueda reiterated on Tuesday that the institution was ready to raise rates if the economy and prices perform as expected, Bloomberg reported.

“The yen is up on these comments,” said Kathleen Brooks, an analyst at XTB.

Indeed, higher rates predict better returns on the currency, reinforcing its attractiveness.

Political uncertainty

The remark by the head of the Japanese central bank comes from a document submitted to a government panel chaired by outgoing Prime Minister Fumio Kishida, in which he explained the monetary policy decision of July.

At the end of July, the BoJ raised its key rate to 0.25%, after a previous increase in March.

Kazuo Ueda had already said he was ready for a new increase if prices accelerated, while the BoJ is due to meet on September 19 and 20.

“We expect that political uncertainty ahead of the next election for the leadership of the ruling Liberal Democratic Party (LDP) and the possibility of early general elections will prevent a rate hike” in the fall, however, tempers Lee Hardman of MUFG.

The analyst notes that “the strength of the yen is particularly evident against commodity-linked currencies” such as the Australian and New Zealand dollars, which are heavily dependent on the health of the Chinese economy, a major consumer of the commodities that both countries export.

But worse-than-expected official figures showed a contraction in manufacturing activity in China in August on Monday, weighing on both currencies.