The upcoming Bank of Japan tightening – 3 ways it could super-boost the JPY

Standard Chartered assessing the likely hood of a much stronger yen than the market expects. Analaysts at the bank specify two scenarios, the second of which is of more interest for next week, with the Bank of Japan meeting on the 18th and 19th:

1. There remains a non-negligible risk of a hard landing in DMs, which may reignite demand for safe-haven assets such as the JPY.

and, yeah, of more interest is 2.

  • The BoJ could potentially surprise with a more aggressive tightening effort than markets anticipate.
  • Note that there are multiple parameters the BoJ can alter from the benchmark rate, the three-tiered system of interest rates and YCC.
  • Bloomberg has also reported that the BoJ may end YCC while spelling out in advance the quantum of bond purchases, perhaps to prevent a sharp rise in long-end yields.

I’ll have to admit I’m not looking for much boost to the JPY from the BoJ decision. It’ll be ‘one and done’ whatever the move from them and with expectations so high I won’t be too keen to jump on any crowded rising yen wave.

This article was written by Eamonn Sheridan at Source