KUALA LUMPUR, Jan 28 (Bernama) -- Bursa Malaysia snapped its five-day winning streak to close lower on Wednesday, as investors took profit following a cumulative gain of 4.25 per cent over the past five sessions, said an analyst. At 5 pm, the FTSE Bursa Malaysia KLCI (FBM KLCI) fell 14.76 points or 0.83 per cent to 1,756.49 from Tuesday’s close of 1,771.25. The market bellwether opened 1.46 points lower at 1,769.79, marking the day’s high, and hit a low of 1,750.05 during the mid-afternoon session. Market breadth was negative with losers trouncing gainers 876 to 384, while 525 counters were unchanged, 964 untraded and 94 suspended. Turnover improved to 3.65 billion units worth RM4.41 billion from Tuesday's 3.58 billion units worth RM4.46 billion.
Based on minutes released by the Bank of Japan and reported by Bloomberg, policymakers are showing growing unease over how yen weakness is feeding into inflation, a shift that could materially affect currency and asset market dynamics in 2026.
While the BOJ framed its December rate hike as consistent with its economic outlook, the tone of the minutes suggests the yen itself is becoming a policy variable, not just a by-product of rate differentials.
What This Means for Markets
The key takeaway is not the December hike — which markets had already priced in — but how sensitive the BOJ is becoming to FX-driven inflation.
Several board members explicitly noted that:
Yen depreciation should be considered when deciding on future rate hikes
FX weakness can influence both headline and underlying inflation
This raises the risk of faster or less predictable policy normalization if the yen comes under renewed pressure.
Yen Volatility Likely to Stay Elevated
At the December meeting:
USD/JPY was around 155
2025 average was near 149.7
Despite the hike, the yen later weakened to 159.45, before rebounding sharply to near 152 following speculation over US rate checks and comments from Donald Trump signalling comfort with a softer dollar.
Original judgment:
USD/JPY is now more policy-sensitive than yield-sensitive, increasing short-term FX volatility even without major rate moves.
BOJ Is Becoming More FX-Aware Than Peers
Unlike the Fed or ECB — which largely treat currency moves as secondary — the BOJ appears increasingly willing to factor FX directly into rate decisions.
One hawkish member noted Japan may still be “a considerable distance” from neutral, suggesting:
Further hikes remain possible
Adjustments could occur every few months, not annually
Original judgment:
This makes the BOJ more reactive to FX shocks than other major central banks, raising the probability of surprise policy signals.
Implications for Japanese Equities
Exporters: A stronger yen could cap earnings upside after years of FX tailwinds
Domestic stocks: May benefit if yen stability helps contain imported inflation
Banks: Gradual normalization supports margins, but FX volatility adds risk
Bottom Line
Yen weakness is now a policy concern, not just a market outcome
FX volatility vs USD is likely to remain elevated
BOJ normalization is gradual, but increasingly responsive to currency moves
Markets will watch USD/JPY as closely as inflation data
The BOJ’s next decision on Mar 19 could mark another test of how far policymakers are willing to lean against yen-driven inflation risks.
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