We are less than a day away from the all important decision from the Bank of Japan, which is accompanied by their semi-annual outlook.
After the Japanese government signaled that further monetary stimulus is unlikely, the tune has changed.
An economic adviser to Japanese PM Shinzo Abe said that it “will not be strange” if the BOJ introduces more easing. In addition, the Nikkei news agency reported about a chance for action, and more than once.
The current QQE program is already quite elevated, but Kuroda and co. can always add 10 or 20 trillion yens in additional bond buying.
Has the change of tune come due to Draghi’s massive move to weaken the euro? Due to China’s surprising rate cut? Or perhaps both?
Yet according to this logic, the Fed’s relative hawkishness should allow the BOJ more breathing space before acting.
So what will it be?
More:
- USD/JPY: Trading The BoJ – RBS, Goldman Sachs
- BOJ: 4 USD/JPY Scenarios – BNP Paribas
USD/JPY is not getting too far from its beloved 120 level, even if the range has widened recently. If the BOJ only lowers forecasts, we’ll probably have more of the same.
If it does nothing, 118 is the target to the downside. If more QE is introduced, the road to 125 is wide open.
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