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22 Apr 2016
BoJ & the JPY: Once Bitten, Twice Shy? - TDS
Research Team at TDS, suggests that the event risk is rising with the upcoming dual Fed/BoJ meeting.
Key Quotes
“We think the decision around the BoJ is an exceptionally close call and is centered around what they should do versus what they will do. Standing idle however, risks strengthening the JPY. Faced with downgrades to growth, inflation, the recent earthquakes and discomfort with the currency, the BoJ will have enough political cover to deliver a token ease.
We consider several policy options but we think a doubling of its ETF program (with a risk to equity purchases outright) is the least worst option. We also see a non-trivial risk that this could be accompanied with rate relief in its loan support program.
This leaves scope for tactical USDJPY upside. We will also monitor AUDJPY ahead of the meeting for a prospective tactical trading opportunity. Nonetheless, we downplay major easing initiatives by the BoJ and beyond an initial stage of euphoria, we do not think this will resonate with markets.”
Key Quotes
“We think the decision around the BoJ is an exceptionally close call and is centered around what they should do versus what they will do. Standing idle however, risks strengthening the JPY. Faced with downgrades to growth, inflation, the recent earthquakes and discomfort with the currency, the BoJ will have enough political cover to deliver a token ease.
We consider several policy options but we think a doubling of its ETF program (with a risk to equity purchases outright) is the least worst option. We also see a non-trivial risk that this could be accompanied with rate relief in its loan support program.
This leaves scope for tactical USDJPY upside. We will also monitor AUDJPY ahead of the meeting for a prospective tactical trading opportunity. Nonetheless, we downplay major easing initiatives by the BoJ and beyond an initial stage of euphoria, we do not think this will resonate with markets.”