USD/JPY: Supported Into BoJ; Dovish Shift In Composition Of BoJ Board Continues - Nomura

Today the Japanese government has nominated an executive of Shinsei Bank, Ms Masai, as a new BOJ board member from July. Current board member, Mr Ishida, who voted against the negative rate decision in January 2016 and QQE expansion in October 2014, is going to retire in June, and Ms Masai will take over the position after parliamentary approval. Her nomination was reported by local media (Nikkei) last month, but the government did not announce the nomination owing to a media leak . Thus, her nomination is unlikely to be a surprise to the market. Nonetheless, the composition of the BOJ board continues to be more dovish owing to this replacement.

...BOJ Governor Kuroda showed his concerns over the negative impact of JPY appreciation on inflation trends in his interview with WSJ. He said excessive JPY appreciation, if it continues, could affect trends in inflation through its impact on business confidence, business activity, and inflation expectations. The BOJ is very likely to downgrade its inflation forecast next week and the likelihood of a BOJ easing remains high.

Expectations of a BOJ easing will support USD/JPY into the meeting next week, in our view.