BOJ Policymaker Calls For Raising Interest Rates

Samantha Luan

Forex

Political

Economic

Summary:

The Bank of Japan (BOJ) must continue to normalise monetary policy by raising real interest rates to "a state of equilibrium" to avoid creating unintended distortions in the future, board member Junko Koeda said on Thursday.

The remarks suggest Koeda, an academic who joined the central bank's board in March, will vote in favour of an interest rate increase if proposed by BOJ governor Kazuo Ueda in the coming months.

Corporate profits remain high, the economy is resilient and prices have been "relatively strong," Koeda said, adding that the recent surge in food prices could affect inflation expectations.

The output gap has been around 0%, while conditions in the job market have been tight due to labour shortages, she said.

"In this situation, the BOJ must continue to raise the policy interest rate and adjust the degree of monetary accommodation in accordance with improvement in economic activity and prices," Koeda said in a speech.

Last year, the BOJ exited a decade-long, massive stimulus programme and raised interest rates twice — including in January. It has kept its policy rate steady at 0.5% since then, even as consumer inflation has remained above its 2% target for more than three years.

With real interest rates "clearly low" compared with other countries, the BOJ can keep stimulating consumption and investment, even if it raises nominal rates slightly, she said.

"The BOJ needs to proceed with interest rate normalisation, that is, to return real interest rates to a state of equilibrium, to avoid creating unintended distortions in the future," Koeda said.

Markets are closely watching BOJ policy signals as Prime Minister Sanae Takaichi has voiced displeasure over the idea of another rate rise in the near term, while urging the central bank to cooperate with government efforts to reflate the economy.

With prospects of prolonged low rates fuelling unwelcome yen declines, however, Finance Minister Satsuki Katayama said on Wednesday that she had no objection to the BOJ's moderate rate-hike path.

The BOJ is scheduled to hold its next policy-setting meeting on Dec 18 and 19, followed by a meeting in January. Many market participants expect the central bank to raise rates to 0.75% either in December or January.

Two of the BOJ's nine members unsuccessfully proposed a rate increase to 0.75% in September and October, in a sign of the bank's increasing attention to inflationary pressure.

Rates still near low end of neutral

At a press conference held after the speech, Koeda said the BOJ's policy rate was still near the lower end of what the central bank views as neutral to the economy.

When asked how soon the BOJ should raise interest rates, Koeda said: "That's a decision to be made by scrutinising underlying economic and price developments."

"With overseas uncertainty remaining, we must look at how this would affect companies' wage-setting behaviour," she said.

Ueda has said that the BOJ will continue to raise interest rates if it is convinced that underlying inflation will stabilise around the 2% target.

"I believe that underlying inflation is about 2%," Koeda said. "But in order to achieve our price target, it is important to examine the extent to which underlying inflation has remained stable or been anchored."

It is also important to scrutinise whether inflation expectations would be stable and look at factors that affect prices, such as the strength of the economy, Koeda said.

While Ueda has said that the BOJ needs more clarity on the outlook for next year's wage negotiations, Koeda said she was also focusing on developments in Japan's minimum wage, winter bonus payments and how increasing job mobility might affect pay.

Source: Theedgemarkets

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Michelle

Commodity

UBS has raised its mid-year 2026 gold price forecast, arguing that the drivers behind this year's surge remain firmly in place as the market heads into another period of heavy investor and central-bank demand.

Gold has held above $4,000 an ounce after a steep climb in 2025 that left it as the year's strongest major asset. UBS strategists said the consolidation has not altered their outlook and now see the metal reaching $4,500 an ounce by June 2026, up from the previous $4,200 call.

"The gold price has stabilized above USD 4,000/oz after a phenomenal run in 2025," strategists led by Wayne Gordon wrote, and despite the pause, they forecast "even higher prices in 2026," prompting their forecast hike.

The strategists point to a combination of further Federal Reserve rate cuts, lower real yields, geopolitical tensions, and rising fiscal concerns in the U.S., all of which they believe should sustain demand from both financial investors and reserve managers.

They also flag increased political noise ahead of the midterm elections as another support for safe-haven buying.

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UBS maintains an Attractive stance on gold and continues to recommend long exposure in its asset allocation. The strategists believe gold "remains an effective portfolio hedge (even at current levels)."

A key part of the bank's bullishness is a rebound in exchange-traded fund (ETF) inflows next year, supported by easier monetary conditions.

UBS forecasts around 750 metric tons of ETF buying in 2026, which would still be more than double the average annual pace seen in the decade after 2010.

The bank also expects persistent central-bank and sovereign wealth demand, projecting purchases of 900 metric tons next year, a moderation from 2025 but far above long-term norms.

"Material underreporting (versus monthly IMF reported purchases) and recent anecdotal conversations with reserve managers signal to us a strong appetite for adding to existingreserves in 2026," strategists noted.

UBS has also raised its upside case to $4,900 an ounce, citing a potential spike in political and financial risks. The bank expects some consolidation around $4,300 an ounce after U.S. political events in late 2026, but sees the overall demand profile as strong.

Source: Investing

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Glendon

Political

Palestinian-Israeli conflict

Israel's Prime Minister Benjamin Netanyahu visited Israeli troops deployed in southern Syria, drawing strong condemnation from the government in Damascus, which denounced the trip as a violation of sovereignty.

Israel expanded its military presence in southern Syria after the ousting of Bashar al-Assad last December, seizing positions east of a U.N.-patrolled buffer zone that separates the Israeli-occupied Golan Heights from Syrian territory.

Wearing a flak jacket and helmet, Netanyahu on Wednesday visited troops on Syrian territory, according to photographs published by his office. He reiterated Israel's commitment to protect Syria's Druze minority, whose community straddles the border into northern Israel.

"We attach immense importance to our capability here, both defensive and offensive, safeguarding our Druze allies, and especially safeguarding the State of Israel and its northern border opposite the Golan Heights," Netanyahu told the troops, according to a statement from his office.

"This is a mission that can develop at any moment, but we are counting on you," he said.

The Islamist-led government in Damascus said Netanyahu's visit was "a dangerous violation of Syrian sovereignty and unity," and called it an attempt to "impose a fait accompli."

There was no immediate comment from the Israeli government.

TALKS ON A SECURITY PACT

Israel captured the Golan Heights from Syria in a 1967 war and later annexed it, a move not recognised by most countries. Syria has demanded that Israel returns to the original buffer zone, but senior Israeli officials have said they will not relinquish the new posts.

For months, Syria has been in U.S.-brokered talks with Israel to reach a security pact that Damascus hopes will reverse Israel's recent seizures of its land but that would fall far short of a full peace treaty.

The talks have faltered since Israel introduced a new demand, opens new tab to allow the opening of a "humanitarian corridor" to Syria's southern province of Sweida. Syria rejected the request as a breach of its sovereignty.

A Syrian military official said the visit showed Israel was not willing to relinquish any territory.

"Netanyahu's visit sends a message: we won't withdraw from the areas we entered after December 8... Regardless of the security deal, its future or its fate, this is the message they're sending Syria - that Israel is not willing to give up these outposts," the official told Reuters.

The two countries have technically been at war since the creation of Israel in 1948, despite periodic armistices. Syria does not recognise the state of Israel.

Since Assad's ousting, Israel has carried out unprecedented strikes on Syrian military assets including the defence ministry, sent troops into its south and lobbied the U.S. to keep Syria weak and decentralised.

Source: Reuters

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Gerik

Economic

Limited Progress Since Summer Summit Highlights Persistent Strain

Jorge Toledo, the European Union’s chief envoy to China, delivered a frank assessment of the diplomatic impasse between the two economic powers, stating that relations have seen little improvement since their summer summit. Speaking at a panel discussion in Beijing, Toledo pointed to ongoing challenges tied to supply chain vulnerabilities and restrictive Chinese export controls particularly those involving rare earth elements essential to European manufacturing.

This candid statement underscores a causal link between unresolved trade tensions and the current diplomatic deadlock. Europe’s persistent dependency on Chinese rare earths continues to expose its industrial base to supply disruptions, limiting strategic autonomy and amplifying calls for diversification.

Rare Earth Export Suspension Presents Opportunity

However, recent developments offer a potential turning point. China’s decision to suspend export controls on rare earth magnets has been welcomed by EU officials as a positive gesture. The move came shortly after U.S. President Donald Trump and Chinese President Xi Jinping reached a partial agreement aimed at easing broader geopolitical tensions an outcome that also eased some of Europe’s concerns.

Toledo described this shift as “good news,” suggesting it could serve as the foundation for broader cooperation if both parties commit to rebuilding trust. This reflects a correlated opportunity between diplomatic de-escalation and the strategic easing of trade barriers. Whether this opening evolves into lasting cooperation depends on sustained transparency and mutual restraint.

Media Narratives and Misunderstanding of EU Unity

Toledo also addressed recent critical portrayals of the EU in Chinese media, which he characterized as misrepresentations designed to shift blame onto Brussels for existing trade and diplomatic frictions. He emphasized that the EU is a unified political union, not merely a collection of individual states acting independently.

This distinction is crucial, as misinterpretation of EU structure may lead Beijing to underestimate the bloc’s cohesion and its ability to formulate collective responses to perceived economic coercion. Toledo warned that dismissing the EU’s political agency would be “risky and not conducive” to productive engagement.

While tensions remain high and recent diplomatic efforts have yielded limited results, China’s easing of rare earth export controls has injected a note of optimism into an otherwise difficult relationship. For the European Union, the path forward will require not just economic recalibration but also a renewed political dialogue grounded in mutual recognition and respect. As both sides weigh their next steps, the rare earth détente may yet serve as a springboard toward broader strategic stability if built upon constructively.

Source: Bloomberg

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Justin

Forex

Commodity

Economic

Summary

· Cocoa futures have fallen to ~USD 5,000/t, a 21-month low and more than 50% off the peak, though still roughly twice their long-term average.

· Market structure has flipped from extreme backwardation to mild contango, signalling a major easing in supply tightness.

· High prices triggered both demand destruction (shrinkflation, dilution) and a strong supply response across West Africa and emerging origins.

· The drop comes too late to improve Christmas chocolate, but next year's Easter eggs may benefit.

The retreat reflects a classic case of "the best cure for high prices is high prices." After several years of weather disruptions, disease pressure and ageing trees in Ivory Coast and Ghana, the world's two dominant producers, the 2023–24 deficit pushed physical supply to breaking point. Crucially, farmgate prices lagged the futures spike, leaving farmers unable to invest just as climate volatility was intensifying. This mismatch created the conditions for the parabolic rise.

That dynamic is now reversing. Improved rainfall, better fertiliser use and rising producer-country prices have encouraged farmers to rehabilitate plantations, prune more aggressively and replant high-yielding varieties. Beyond West Africa, elevated returns have sparked investment in Latin America and Southeast Asia, gradually broadening the global supply base.

This transition is visible in the forward curve. One year ago, the Dec-24 futures contract traded in New York held a 23% premium over Dec-25, an extreme backwardation that highlighted acute nearby scarcity. Today, Dec-25 trades at a USD 270/t or 5.5% discount to Dec-26, reflecting a return to contango and a market that is no longer scrambling for prompt supply. Producers are again willing to hedge, inventories are starting to recover and traders are no longer paying panic-level premiums to secure beans.

Demand has also played an essential role in normalising the balance. Record-high raw material costs forced chocolate manufacturers into a series of unpopular choices: shrinkflation, price increases and the quiet dilution of cocoa content. The latter has become sufficiently widespread that some UK biscuits and bars can no longer legally be labelled "chocolate," instead qualifying only as "chocolate flavour" coatings dominated by palm and shea oils. This is classic demand destruction — the point at which consumers either trade down or manufacturers reformulate to protect margins.

Lower cocoa prices will not immediately reverse shrinkflation or dilution. Recipe reformulations tend to stick, at least for a while. Reversing them requires either competitive pressure or a sustained period of lower input costs. But the potential is now there. Cocoa at USD 5,000/t is still expensive by past standards but far more manageable for manufacturers than USD 12,000/t.

Seasonality adds a timely twist. The current slump arrives far too late to affect Christmas assortments already produced and priced months ago. The supply shock hit during the production cycle for 2024 holiday products, meaning consumers will still face high prices and—depending on the brand—lighter bars with more palm oil than they might expect. But if the market stabilises around current levels, the impact could show up in 2026's Easter eggs and bunnies. In a market where humour is often in short supply, it is tempting to say that while the cocoa slump won't save Christmas, it may soften the blow for Easter.

From a trading perspective, the picture now looks considerably more balanced than it did a few months ago. The froth that characterised the peak has largely evaporated, evident in the sharp contraction in aggregate open interest as speculative positions were unwound. The recent stabilisation and modest uptick in open interest likely reflect a mix of fresh speculative selling and renewed producer hedging as prices return to more workable levels. With the parabolic phase behind us, price action should increasingly be driven by more conventional fundamentals: West African weather patterns, disease management, the pace of replanting and political risk in key producer nations. On the demand side, global growth trends, consumer sentiment and the extent to which manufacturers restore cocoa content will shape the recovery profile.

The next key question is sustainability. Can the new supply momentum be maintained? West Africa remains vulnerable to climate variability, and gains in new origins may be too small to offset problems if a serious weather event hits the region again. Meanwhile, if manufacturers do not reverse shrinkflation or dilution, demand may not rebound as quickly thereby keeping a ceiling on prices.

Overall, cocoa's downturn marks the start of normalisation after a once-in-a-generation shock. The slump has stabilised the market, given farmers breathing room and eased pressure on buyers. For consumers, the benefits are coming — just not in time to salvage this year's Christmas stockings. But Easter? That might finally bring a bit more real chocolate and a bit less "chocolate-flavoured" improvisation.

Cocoa charts

Source: SAXO

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Gerik

Economic

A Crucial Financial Cushion in Unpredictable Times

From unexpected car repairs to medical emergencies, unplanned expenses can disrupt even the most stable financial routines. That’s why an emergency fund savings set aside strictly for urgent and unforeseen costs is essential. According to Miklos Ringbauer, a certified public accountant, the ability to cover life’s surprises hinges on having access to immediate cash.

The commonly cited benchmark is to save three to six months of living expenses. However, that target can feel intimidating for those managing debt or tight budgets. But, as Jaime Eckels of Plante Moran Financial Advisors explains, building an emergency fund is even more critical in those circumstances because it prevents further debt accumulation. This causal benefit is clear: savings help break the cycle of borrowing to cover emergencies.

Start Small and Make the Goal Attainable

The overwhelming nature of saving several months' worth of expenses can be a deterrent. Experts suggest beginning with an initial milestone such as saving $1,000 before progressing to one month, then gradually to three and six months of expenses. Eckels points out that even small regular deposits, such as $20 from each paycheck, contribute meaningfully over time.

Crucially, storing these funds in a separate high-yield savings account (rather than mixing them with everyday savings) helps reinforce their purpose and makes it less tempting to withdraw unnecessarily. This separation also aids in tracking and mental accounting.

Tailor the Fund to Your Lifestyle and Income Pattern

There’s no universal target amount for everyone. Rachel Lawrence of Monarch Money stresses that your fund should reflect your actual obligations. A single professional with few responsibilities might need only $2,000 to $3,000, whereas a parent with dependents and multiple financial liabilities should aim for a more extensive cushion.

For freelancers and gig workers, the suggestion is to maintain two types of funds: one to stabilize income during lean months and another strictly for emergencies. By setting aside money during periods of high income, self-employed individuals can create a buffer system that protects against income volatility a frequent challenge in the gig economy.

Automate the Process for Long-Term Success

Automation is another powerful tool in building emergency savings. By scheduling recurring transfers into a dedicated savings account ideally coinciding with payday you can build a habit while eliminating the decision-making fatigue around saving. Eckels recommends choosing an account separate from your checking account, preferably at a different institution, to make accessing the money less convenient unless truly needed.

This behavioral barrier helps preserve the integrity of the emergency fund while building a disciplined financial routine.

Make Your Progress Visible and Rewarding

Creating visual cues to track your savings can be a strong motivator. Lawrence recommends tools like habit-tracking apps, progress charts, or personalized visual goal markers to trigger psychological rewards. These tools help reinforce consistency and can make the act of saving feel emotionally satisfying not just financially responsible.

The more visible the progress, the more often the brain feels reinforced, and the stronger the habit becomes.

Use Windfalls Strategically

For individuals with very little monthly wiggle room, occasional windfalls such as tax refunds, bonuses, or rare third paychecks in a month can be used to make significant strides toward an emergency fund. Lawrence advises a balanced approach: keep 10% of the windfall for personal use and direct the rest into your fund. This method ensures you’re both saving and celebrating the extra cash, which supports long-term motivation.

Importantly, experts agree that using your emergency fund in a real emergency is a sign of financial strength not weakness. The fund’s purpose is to be used in times of genuine need. As Lawrence explains, you wouldn’t feel guilty about using a retirement fund to retire or a down payment to buy a home. The same principle applies here.

Once used, the next step is simply to rebuild it knowing it served its purpose exactly as intended.

An emergency fund is not an all-or-nothing financial goal it’s a progressive, strategic cushion that grows with discipline, planning, and flexibility. Whether you’re dealing with debt, earning a variable income, or just starting out, building a safety net is not only possible but essential. With the right mindset and tools, even small steps can lead to significant financial stability over time.

Source: AP

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FXOpen

Forex

Technical Analysis

The dollar strengthened across the board following the publication of the minutes from the latest Federal Reserve meeting. The document confirmed the regulator's readiness to cut rates further, but without clear timing and with an emphasis on future decisions depending on incoming data. For some market participants, this sounded less "dovish" than expected, prompting increased demand for the dollar, while Treasury yields held near local highs.

Another source of uncertainty remains the impact of the prolonged US government shutdown. Due to the suspension of statistical agencies, some key releases on employment and inflation were not published on schedule, meaning that the upcoming batch of labour-market data may bring surprises. Today, investors are focused on private-sector employment reports, jobless-claims data, and related indicators, which will help shape expectations ahead of the Fed's next decisions.

USD/JPY

The USD/JPY pair has reached this year's extremes, reacting to the monetary-policy differential. The pair is trading above 157.00, reflecting a combination of a more resilient dollar and the Bank of Japan's persistently dovish stance. The market still does not see the Japanese regulator preparing for tightening, whereas the Fed, despite being in a rate-cutting cycle, maintains a cautious tone and highlights inflation risks.

Technical analysis of USD/JPY suggests a possible test of the key 158.00–158.90 range if the 157.00 level confirms itself as support. Should a downward pullback develop, the pair may decline towards 155.20–156.00.

Events that may influence USD/JPY pricing in the coming trading sessions include:

today at 16:30 (GMT+3): US average hourly earnings
today at 16:30 (GMT+3): US non-farm employment change
today at 16:30 (GMT+3): Philadelphia Fed manufacturing index

USD/CAD

Sellers of USD/CAD made another attempt yesterday to break support at 1.3980, but were unsuccessful. The price rebounded sharply from this level and held above 1.4000. If the upward momentum continues, the pair may revisit recent highs near 1.4140. A firm move back below 1.4000 could trigger another approach towards 1.3930.

Events that may influence USD/CAD pricing in the coming trading sessions include: