USD/JPY: BoJ April/June Easing Not Reflected In Spot Market - Credit Agricole

USD/JPY traded lower this week after dovish comments from Yellen triggered another bout of broad USD weakness. Domestic data releases have had little impact on the pair recently, with relative rate spreads and the improvement in risk sentiment having been the key drivers.

While our economists expect the BoJ to announce another round of QE and further rate cuts in June or even in April, broadly in-line with other economists (the March Bloomberg survey showed almost 50% of economists expect further easing in June/July with 27.5% expecting further easing in April), we do not believe this is reflected in the spot market with investors adding to JPY long positions last week.

This week, current account data and various confidence indicators are due for release. The monthly balance of payments data is likely to show a rise in domestic buying of foreign assets coinciding with the weekly MoF data. While the data seems to suggest that Japanese investors have been exploiting the relatively strong JPY to expand their purchases abroad, such portfolio outflows should ultimately weigh on JPY.

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