USD/JPY: Flows Supporting Bearish Outlook - BTMU
Market expectations for extra monetary easing by the BoJ have been growing in the past few days.
"The Nikkei has recovered to above the 17,000 level, but even with the Nikkei’s notable recovery, USD/JPY topside has been heavy and USD/JPY stayed below the 110 level.
Underlying USD/JPY flows still support JPY strengthening. Next week’s key events are the April FOMC (26-27) and BoJ meetings (27-28).
We do not expect the BoJ to expand monetary easing at this stage. The key factors surrounding the yen and Japan’s economy have shifted from the BoJ’s negative interest rate policy to fiscal stimulus and political triggers, G-7 summit in May and the Upper House election in July.
We are also watching risk appetite among Japanese companies and investors, who are still being cautious despite becoming acclimatized to negative interest rates. The results of the by-elections in Kyoto and Hokkaido on April 24 will be the next political events."