Log in Open account
Australia
JPY: Bank of Japan adds to reasons to stay bearish yen

JPY: Bank of Japan adds to reasons to stay bearish yen

Forex 3 minutes to read
Charu Chanana

Chief Investment Strategist

Summary:  The Bank of Japan surprised dovish again, both in action and language. While it was expected that policy rates will remain unchanged, there was some speculation around tweaks to bond buying. However, Governor Ueda dampened expectations around that, and there was no sense of urgency from FX moves with yen at record lows. Intervention risks remain, but market will likely fade any yen strength.

The Bank of Japan (BOJ) kept the policy settings unchanged at the April meeting, as expected. But the statement managed to surprise dovish yet again.

  • The short-term interest rate was kept unchanged at between 0% to 0.1% as expected
  • It said it would continue buying JGBs, CP and corporate bonds in line with its March policy decision. However, it removed its previous footnote referring to a monthly purchasing amount of 6 trillion yen.
  • The BOJ raised its outlook for CPI ex-fresh food for the current 2024 fiscal year to 2.8% from a previous 2.4%.
  • There was no clear statement expressing concern on FX moves, or a mention of QE tapering.
  • Bond buying was tweaked, but the statement only said that the BOJ will continue buying JGBs and corporate bonds in line with its March policy decision. There was no clear mention of the amount, which previously stood at 6 trillion yen per month, or the timing. In the presser, Governor Ueda also said that there was no opposition at the meeting to continue with the purchases at that level. This would put any speculations around QE tapering to rest for now.

Market implications

  • Yet again, the BOJ managed to surprise dovish. Governor Ueda’s comments at the press conference lacked an urgency on FX. In fact, Ueda said that the yen is not having a big impact on inflation.
  • Markets will likely be reaffirmed in their belief of the carry, and continue to test the limit of yen weakness.
  • USDJPY could see an accelerated move towards 158-160, with Kanda's comments of a 10 yen move in a month as a threshold for intervention giving room for further upside. For more on this, read our previous article on JPY here.
  • US PCE on the radar, and we are back to waiting for an intervention to stop the rout in the yen. But any intervention, if not coordinated and without the support of a hawkish policy messaging, will still be futile.
  • Still, the NY close is the time to watch for an intervention today, as liquidity is low going into a long weekend in Japan.
  • There is also likely to be some profit taking ahead of the close amid intervention risks.
  • However, markets will continue to fade any yen strengthening on the back of an intervention with Fed meeting and Treasury’s Quarterly Refunding announcement due next week likely to keep US rates volatile.

-----------------------------------------------------------------------

Other recent Macro/FX articles:

26 Apr: Global Market Quick Take - Asia
25 Apr: JPY: Accelerated sell-off; can the BOJ halt yen's decline?
25 Apr: Thematic Podcast: Deciphering Asian forex interventions
23 Apr: Technical Update - USDJPY ticking higher. EURJPY and AUDJPY at key resistance levels. GBPJPY range bound, bullish breakout?
23 Apr: GBP: What can drive the next leg lower?
22 Apr: Weekly FX Chartbook: Stretched USD strength is raising intervention alert
19 Apr: FX 101: Using FX for portfolio diversification
18 Apr: JPY: Intervention alert, or a BOJ alert?
16 Apr: Chinese Yuan’s Double Whammy - Dollar Strength and Yen Weakness
12 Apr: Riding the Fed-ECB Policy Divergence
11 Apr: ECB rate decision: How to trade the event
9 Apr: CAD vulnerable as market underprices dovish Bank of Canada risks
9 Apr: US inflation report: How to trade the event
8 Apr: Macro and FX Podcast: NFP, CPI, ECB and Japan
3 Apr: Chinese yuan bears are undeterred by PBoC’s grip
3 Apr: FX Quarterly Outlook: The rate cut race shifts into high gear
22 Mar: Swiss National Bank’s bold move will kickstart the G10 rate cut cycle
20 Mar: Thematic Podcast: Japan's route to abolish negative interest rates
20 Mar: Japan’s exit from negative rates: Implications for the economy, yen and stocks
14 Mar: FOMC vs. BOJ: Who moves the Yen?
12 Mar: Dampening equity sentiment could test GBP resilience
6 Mar: Bitcoin fever is running high, again
28 Feb: Navigating Japanese equities: Strategies for hedging JPY exposure
23 Feb: Nvidia momentum spills over to FX markets
15 Feb: Swiss Franc’s bearish view gets more legs
14 Feb: Sticky US inflation could make dollar strength more durable
9 Feb: Japanese Yen is throwing a warning
8 Feb: FX 101: USD Smile and portfolio impacts from King Dolla

 

Quarterly Outlook

01 /

  • Macro Outlook: The US rate cut cycle has begun

    Quarterly Outlook

    Macro Outlook: The US rate cut cycle has begun

    Peter Garnry

    Chief Investment Strategist

    The Fed started the US rate cut cycle in Q3 and in this macro outlook we will explore how the rate c...
    Read full article
  • Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Quarterly Outlook

    Fixed Income Outlook: Bonds Hit Reset. A New Equilibrium Emerges

    Althea Spinozzi

    Head of Fixed Income Strategy

    Read full article
  • Equity Outlook: Will lower rates lift all boats in equities?

    Quarterly Outlook

    Equity Outlook: Will lower rates lift all boats in equities?

    Peter Garnry

    Chief Investment Strategist

    After a period of historically high equity index concentration driven by the 'Magnificent Seven' sto...
    Read full article
  • FX Outlook: USD in limbo amid political and policy jitters

    Quarterly Outlook

    FX Outlook: USD in limbo amid political and policy jitters

    Charu Chanana

    Chief Investment Strategist

    As we enter the final quarter of 2024, currency markets are set for heightened turbulence due to US ...
    Read full article
  • Commodity Outlook: Gold and silver continue to shine bright

    Quarterly Outlook

    Commodity Outlook: Gold and silver continue to shine bright

    Ole Hansen

    Head of Commodity Strategy

    Read full article
  • FX: Risk-on currencies to surge against havens

    Quarterly Outlook

    FX: Risk-on currencies to surge against havens

    Charu Chanana

    Chief Investment Strategist

    Explore the outlook for USD, AUD, NZD, and EM carry trades as risk-on currencies are set to outperfo...
    Read full article
  • Equities: Are we blowing bubbles again

    Quarterly Outlook

    Equities: Are we blowing bubbles again

    Peter Garnry

    Chief Investment Strategist

    Explore key trends and opportunities in European equities and electrification theme as market dynami...
    Read full article
  • Macro: Sandcastle economics

    Quarterly Outlook

    Macro: Sandcastle economics

    Peter Garnry

    Chief Investment Strategist

    Explore the "two-lane economy," European equities, energy commodities, and the impact of US fiscal p...
    Read full article
  • Bonds: What to do until inflation stabilises

    Quarterly Outlook

    Bonds: What to do until inflation stabilises

    Althea Spinozzi

    Head of Fixed Income Strategy

    Discover strategies for managing bonds as US and European yields remain rangebound due to uncertain ...
    Read full article
  • Commodities: Energy and grains in focus as metals pause

    Quarterly Outlook

    Commodities: Energy and grains in focus as metals pause

    Ole Hansen

    Head of Commodity Strategy

    Energy and grains to shine as metals pause. Discover key trends and market drivers for commodities i...
    Read full article
Disclaimer

Saxo Capital Markets (Australia) Limited prepares and distributes information/research produced within the Saxo Bank Group for informational purposes only. In addition to the disclaimer below, if any general advice is provided, such advice does not take into account your individual objectives, financial situation or needs. You should consider the appropriateness of trading any financial instrument as trading can result in losses that exceed your initial investment. Please refer to our Analysis Disclaimer, and our Financial Services Guide and Product Disclosure Statement. All legal documentation and disclaimers can be found at https://www.home.saxo/en-au/legal/.

The Saxo Bank Group entities each provide execution-only service. Access and use of Saxo News & Research and any Saxo Bank Group website are subject to (i) the Terms of Use; (ii) the full Disclaimer; and (iii) the Risk Warning in addition (where relevant) to the terms governing the use of the website of a member of the Saxo Bank Group.

Saxo News & Research is provided for informational purposes, does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. No Saxo Bank Group entity shall be liable for any losses that you may sustain as a result of any investment decision made in reliance on information on Saxo News & Research.

To the extent that any content is construed as investment research, such content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication.

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments.Saxo Capital Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Capital Markets or its affiliates.

Please read our disclaimers:
- Full Disclaimer (https://www.home.saxo/en-au/legal/disclaimer/saxo-disclaimer)
- Analysis Disclaimer (https://www.home.saxo/en-au/legal/analysis-disclaimer/saxo-analysis-disclaimer)
- Notification on Non-Independent Investment Research (https://www.home.saxo/legal/niird/notification)

Saxo Capital Markets (Australia) Limited
Suite 1, Level 14, 9 Castlereagh St
Sydney NSW 2000
Australia

Contact Saxo

Select region

Australia
Australia
Products & pricing
Asset Management
    Platforms
    Accounts & service
    General
    Other
    Legal

    Trading can result in losses. Please ensure you understand the risks.

    The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit www.home.saxo/en-au/about-us/awards

    Saxo Capital Markets (Australia) Limited ABN 32 110 128 286 AFSL 280372 (‘Saxo’ or ‘Saxo Capital Markets’) is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms, Financial Services Guide, Product Disclosure Statement and Target Market Determination to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

    Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Saxo Capital Markets does not provide ‘personal’ financial product advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Capital Markets does not take into account an individual’s needs, objectives or financial situation. The Target Market Determination should assist you in determining whether any of the products or services we offer are likely to be consistent with your objectives, financial situation and needs.

    Apple, iPad and iPhone are trademarks of Apple Inc., registered in the US and other countries. AppStore is a service mark of Apple Inc.

    The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan.

    Please click here to view our full disclaimer.