The yen's exchange rate strengthened one percent against three other major currencies due to issues surrounding the leadership of Japan's central bank.

USD/JPY and various yen cross pairs are again disturbed by the issue of changing the leadership of the Japanese central bank (BoJ). USD/JPY, GBP/JPY, and EUR/JPY each fell 1 percent in Asian trading through the early European session on Friday, February 10.

USD/JPY Daily

Haruhiko Kuroda has served as BoJ Governor since March 20, 2013, and will end it on April 8, 2023. Kuroda implemented an ultra-loose monetary policy throughout his tenure, marked by the implementation of negative interest rates and the controversial yield curve control (YCC) policy.

Market participants hope that Japan's ultra-loose monetary policy will come to an end with Kuroda's resignation. Those expectations have been driving the yen exchange rate and weighing on USD/JPY since late last year. However, these expectations can only be realized if the next BoJ leadership takes a more hawkish outlook.

USD/JPY jumped earlier this week after the Nikkei reported that Japan would appoint Deputy Governor Masayoshi Amamiya to replace Kuroda. This is because Amamiya is known as a character who has the same dovish leanings as Kuroda.

The rumors were later dismissed by government officials. However, concerns about the BoJ's dovish potential continued to haunt until today's latest news circulated.

The Nikkei Asian Review reported this morning that the Japanese government will appoint former BoJ Policy Council member Kazuo Ueda to replace Kuroda. The leading business media also revealed that the Japanese government originally intended to appoint Amamiya to replace Kuroda, but Amamiya refused the offer.

Market participants spontaneously bought yen because they felt relieved that Amamiya was not appointed as Kuroda's replacement. But analysts say that Ueda's policy bias is not yet known. Observers had previously not considered Ueda a strong candidate to replace Kuroda.

"While the market is reacting to the fact that the new (BoJ) Governor will not be Amamiya, who is a notorious dovish figure, we suspect that the BoJ's policy going forward (under Ueda) will not be much different," Jane Foley, Rabobank's chief FX strategist, told CNBC.

"Ueda seems like a very different type to Kuroda, in terms of his figure as an academic who will clearly execute policies based on actual economic fundamentals and a discussion of values with markets," said Hiroaki Muto, economist at Sumitomo Life Insurance Co., adding that Ueda isn't necessarily hawkish either.