Forex Flash: Best case for USD/JPY is an open-ended QE - Westpac
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USD/JPY
FXstreet.com (Barcelona) - The outcome of the Bank of Japan meeting, expected from 3 to 5GMT, will have, according to Westpac FX analyst Sean Callow, two market-sensitive releases: "the policy decision (first) and the BoJ-government joint policy statement. The latter should include a 2% inflation target without a specific timeframe and regular progress reports" he says.
Mr. Callow adds: "There seems a little more uncertainty over the policy decision. An increase in asset purchases of at least JPY10trn ($112bn) is widely expected (from the current JPY101trn). The bulk of the purchases should be JGBs and T-bills. But there are some predicting open-ended easing, say JPY4trn per month. And analysts are unsure whether other steps will be included, such as removing the 0.1% floor on short term rates. The biggest risk for USDJPY is a cautious JPY10trn increase in asset purchases and not much else new aside from the 2% target. The best case for USDJPY bulls is an open-ended commitment to increase QE until the inflation target is met, suggested by Reuters sources last week but not Westpac's base case."
Mr. Callow adds: "There seems a little more uncertainty over the policy decision. An increase in asset purchases of at least JPY10trn ($112bn) is widely expected (from the current JPY101trn). The bulk of the purchases should be JGBs and T-bills. But there are some predicting open-ended easing, say JPY4trn per month. And analysts are unsure whether other steps will be included, such as removing the 0.1% floor on short term rates. The biggest risk for USDJPY is a cautious JPY10trn increase in asset purchases and not much else new aside from the 2% target. The best case for USDJPY bulls is an open-ended commitment to increase QE until the inflation target is met, suggested by Reuters sources last week but not Westpac's base case."
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