Mitsubishi UFG Says Government's Bank of Japan Picks Point to Near-Term Yen Downside Risks

09:51 AM EST, 02/25/2026 (MT Newswires) -- There has been a clear underperformer on Wednesday and Tuesday this week so far, and that's the yen (JPY) after the government announced Bank of Japan board picks to replace Asahi Noguchi at the end of March and Junko Nakagawa at the end of June, said MUFG.

Prime Minister Sanar Takaichi on Wednesday nominated Toichiro Asada, a Chuo University Professor, and Ayano Sato, an Aoyama Gakuin University Professor, to replace the departing policy board members, wrote the bank in a note to clients.

Asada is well known for his reflationist views, having co-authored work with former BoJ Deputy Governor Masazumi Wakatabe in the past. He also served as a lecturer for the LDP's Fiscal Policy Review Committee, a party group advocating for fiscal expansionary policies, pointed out MUFG.

Sato is less recognized in this vein, but has also lectured in LDP circles that advocate fiscal expansion and has worked closely with those recognized for those policy leanings.

MUFG said it can't be sure this will change the policy board dramatically, especially given the two departing members were on the dovish side. But these selections come in the same week that there were media reports that PM Takaichi last week pressured Governor Kazuo Ueda to act more cautiously going forward. The Nikkei also reported it was the U.S. that instigated checking rates in USD/JPY in January and not Tokyo, implying Japan's indifference to yen weakness.

MUFG noted 15bps worth of BoJ tightening is priced for April, and whether or not that pricing is endorsed over the coming weeks will be "crucial", although it also notes the new policy board picks don't necessarily mean Takaichi is opposed to some nearer-term tightening.

Policy board member Hajime Takata gives a speech on Thursday, but he is a known hawk, so more important will be a speech from Deputy Governor Ryozo Himino on Monday in Wakayama, according to MUFG. If an April hike is being considered, it expects Himino's tone to at least be consistent with that possibility.

If he fails to do that there is an increased risk of further yen selling, MUFG added.

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