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
“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.”