An opinion summary from the Bank of Japan's June meeting revealed on Monday that one policymaker asked for an early adjustment to the highly debated yield curve control, suggesting the ultra-loose monetary policy of the central bank might be at a crossroads.
Investors are keeping an eye out for similar statements in the near future that may signal a change in policy, even if analysts believe the message only represents a minority position of the BOJ board.
The bank's summary of views was released at the same time that Japan's top currency official intensified his warning against yen declines on Monday, letting markets know that the government might step in to stop the slide.
One of the nine members of the board was mentioned in a summary of views at the June meeting as suggesting that the Bank should keep the broad framework of monetary ease for the time being.
Despite this, the member argued that a revision to how YCC is treated should be discussed as soon as possible in order to minimize sudden changes in interest rates during the next stage of exiting the existing monetary policy.
In contrast to Governor Kazuo Ueda's comments excluding any impending change in policy, it was the initial time the BOJ report revealed a board member specifically stating the necessity for an early discussion of a revision to YCC.
Despite being close to the over seven-month low of 143.87 reached on Friday, the yen increased 0.3% to 143.27 a dollar on Monday following the publishment of BOJ report.
Despite the fact that one member of the YCC demanded change, Daisaku Ueno, a chief currency strategist from Mitsubishi UFJ Morgan Stanley Securities, stated that we need to wait and see if other members, like Ueda, will follow suit.
In order to stably reach its 2% inflation objective, the BOJ uses YCC to set short-term rates of interest at -0.1% and the yield on 10-year bonds at about zero.
The BOJ's ultra-dovish position and other central banks' hawkish stances have drawn investors' attention, which has led to new pressure on the yen in recent weeks.
Some market participants predicted that the central bank might adjust YCC as early as July to resolve market distortions brought on by its massive bond purchases, such as by enlarging the allowance zone set around the ten-year yield goal.
New yen worries
According to some analysts, YCC is also to blame for the unpleasant yen decline that increased the cost of importing raw materials.
Masato Kanda, Japan's top currency diplomat, said on Monday that recent developments were "rapid and one-sided" in a hint of growing alarm over the sinking yen.
Kanda, the vice minister of finance for international affairs, responded when asked if the government was prepared to intervene in the market that they have all alternatives available and they are not excluding any options.
However, unlike when he first entered the currency market last year, Kanda refrained from using the phrase "decisive action" to indicate that Japan was prepared to do so.
The government will react "appropriately" to any erroneous currency moves, according to Finance Minister Shunichi Suzuki, who was quoted as well by Japan's Jiji news agency on Monday.
On Monday, the yen was trading around 143 to the dollar in Asia, well away from the 32-year low of 152 reached in last October, when Japan last made an unusual yen-buying intervention to stop the currency's depreciation.