Commerzbank’s two factors that’ll prompt a weaker yen if the BOJ holds steady policy

Commerzbank analysts argue that the Japanese yen will be impacted by two factors if the Bank of Japan monetary policy meeting once again doesn’t produce any policy tweak/change:

  • short-term, the carry disadvantage will put pressure on the currency;
  • and long-term, there is a risk that inflation will become so entrenched that monetary policy won’t be able to control it without suffering significant fiscal fallout.

Commerzbank lays out a very pessimistic potential risk, saying that uncertainty around whether “equilibrium” JPY exchange rates still exist, or whether there is a possibility of a never-ending depreciation/inflation spiral, is what is exerting pressure on the yen even at its current low level.


Earlier previews:

BOJ is likely to consider raising their consumer inflation projection to around 2.5%

This article was written by Eamonn Sheridan at Source