Can Japanese Policy Weaken JPY? – Nomura
Research Team at Nomura, suggests that after the sharp JPY depreciation
owing to disappointment from the BOJ, USD/JPY has stabilised around 109,
the level before expectations of a BOJ easing increased because of a
media report.
Key Quotes
“While US data and global risk sentiment remain key drivers of USD/JPY,
Japanese policy development from mid-May to July could move JPY.
After the BOJ’s disappointment, we believe fiscal policy will be the near-term focus for Japanese macro policy developments.
While near-term FX intervention is unlikely especially after the recent
recovery in USD/JPY, comments on the FX market from Finance Minister Aso
and US Treasury Secretary Lew into the G7 Finance Ministers and Central
Bank Governors meeting on 20-21 May are important for evaluating the
possibility of FX intervention in the future. Any convergence or further
divergence in their views would be worth monitoring, while they are
more likely to just repeat their G20 commitment (“excess volatility and
disorderly movements in exchange rates can have adverse implications for
economic and financial stability” and “we will refrain from competitive
devaluations and we will not target our exchange rates for competitive
purposes”), which could maintain the current divergence in FX views
between the US and Japan.
While the BOJ disappointed the market in April, expectations for
additional easing by the BOJ remain high. 31% of BOJ watchers expect the
next BOJ easing to be in June, while 79% expect a BOJ easing by July,
according to JCER. Our client survey ahead of the April meeting showed
that ETF purchases and a negative rate loan support programme were the
likely policy options of the BOJ.”