JPY: Back on track? – Rabobank
31.07.2024, 10:08

JPY: Back on track? – Rabobank

Counter to the view of the majority of BoJ watchers, the central bank this morning announced a 15-bps rate hike which was decided by a 7-2 majority. It also announced that its bond buying programme will be reduced by about JPY400 bln each quarter, so that it will be about JPY3 trn in Q1 2026, from around twice that size recently, Rabobank’s senior FX strategist Jane Foley notes.

Yen strengthens against the US Dollar

“The BoJ’s policy statement includes a fairly optimistic assessment of the Japanese economic outlook stating that fixed investment is ‘on a moderate increasing trend’ and corporate profits are ‘improving’. It states that wage rises ‘have been spreading across regions, industries, and firm sizes.’ This leaves the door open for further rate hikes potentially in late 2024 or early 2025.” 

“While USD/JPY softened on today’s policy announcement, it had rallied earlier in the session on local press reports that a rate hike was being discussed by the BoJ. While USD/JPY is off the day’s lows, it is still holding below yesterday’s opening levels. We have brought forward our previous year end USD/JPY forecast of 152.00 to a 3-month view and have adjusted lower our 1 month forecast.”

“The next key focus for USD/JPY is this evening’s Federal Reserve policy announcement. The USD has been on the back foot through much of July as the market priced in a Fed rate cut in July. This helped to accentuate the impact of suspected MoF intervention starting on July 11.  The USD may soften a touch more, though we wouldn’t expect a big USD move following the Fed today.”

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