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2 Feb 2016
BOJ negative rates to reaccelerate JPY depreciation trend - Nomura
FXStreet (Delhi) – Research Team at Nomura, suggests that Kuroda delivered again, with the most effective option as the BOJ and JPY were both at a critical juncture before the meeting last week.
Key Quotes
“USD/JPY reaction on day 1 was smaller than its reactions after the QQE 1 and 2 announcements, but we see the decision as highly JPY negative in the medium term for three reasons: 1) it showed policy makers’ clear commitment to preventing USD/JPY depreciation to below 115, and 115 would be the new “Kuroda floor”, 2) the BOJ now has a new option for easing, which keeps markets alert to possible BOJ surprises, discouraging speculative JPY long positions, and 3) broadly lower JGB yields are likely to accelerate fixed income outflows from Japan. We have been expecting USD/JPY to recover to 122 by end-March and 125 by end-June, but we would not be surprised if USD/JPY reached these targets much sooner.”
Key Quotes
“USD/JPY reaction on day 1 was smaller than its reactions after the QQE 1 and 2 announcements, but we see the decision as highly JPY negative in the medium term for three reasons: 1) it showed policy makers’ clear commitment to preventing USD/JPY depreciation to below 115, and 115 would be the new “Kuroda floor”, 2) the BOJ now has a new option for easing, which keeps markets alert to possible BOJ surprises, discouraging speculative JPY long positions, and 3) broadly lower JGB yields are likely to accelerate fixed income outflows from Japan. We have been expecting USD/JPY to recover to 122 by end-March and 125 by end-June, but we would not be surprised if USD/JPY reached these targets much sooner.”