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Analysts at MUFG Bank, see the USD/JPY pair with a bearish bias and expect it to trade in the 100.00-112.00 range over the next month. 

Key Quotes:

“The sharp sell-off in global equity markets has seen the yen resume its usual role as a safe haven currency during periods of more intense risk aversion. At the same time, the yen is benefitting from the unwind of funding positions.”

“USD/JPY formed a temporary bottom at 87.19 in December 2008 after falling sharply from a high of 110.66 in August 2008. The adjustment lower in USD/JPY has not been as aggressive on this occasion having recently hit a low of 101.19 after falling from a high of 112.23 in February. It still leaves scope for further USD/JPY downside even if yen bullish sentiment is becoming more extreme.”

“The BoJ has announced a package of easing measures including: i) increased purchases of ETFs, J-REITs, CP and corporate bonds and ii) the introduction of Special Funds-Supplying Operations to Supply Corporate Financing. The BoJ decided against lowering their key policy rate deeper into negative territory. Given the BoJ’s depleted ammunition, the onus is now on fiscal policy to provide more support for Japan’s economy.”

“The policy steps while more comprehensive than initially expected are unlikely to prove sufficient to prevent the yen from strengthening further in the current challenging external environment as the global economy falls sharply into recession.”