8 Apr 2015
JPY shorts at low level into BOJ - Nomura
FXStreet (Bali) - The BOJ is widely expected to leave its policy unchanged at today's meeting, notes Yujiro Goto, FX Strategist at Nomura.
Key Quotes
"The BOJ is widely expected to leave its policy unchanged at today's meeting (8 April). No BOJ watchers expect the Bank to ease at the meeting, according to the Bloomberg survey. February core inflation dropped to 0%, excluding the consumption tax hike impact. However, inflation expectations among corporates and households have been resilient, according to the surveys conducted by the BOJ."
"In addition, large firms have increased base salaries for this fiscal year, at a higher pace than the previous fiscal year. These numbers are not necessarily very encouraging for the BOJ, as the Bank is trying to increase inflation expectations toward 2%. Nonetheless, stable inflation expectations even amid slowing actual inflation should encourage the Bank to keep its policy unchanged for now."
"Even though market expectations for policy change at the meeting are limited, there are some expectations for easing at the next meeting on 30 April. 3 out of 34 BOJ watchers (9%) expect the BOJ to ease on 30 April, according to Bloomberg."
"We think Governor Kuroda is likely to remain optimistic on the inflation outlook and he is unlikely to suggest any further easing in the near future. Governor Kuroda’s optimistic view may disappoint the market, putting pressure on USD/JPY."
At the same time, JPY short positions at IMM have declined to just $2.5bn by 31 March, the smallest amount since October 2012. As BOJ easing expectations into 30 April meeting have also declined over the past few months, the magnitude of USD/JPY depreciation reported at Governor Kuroda’s press conference should be relatively limited, and it is unlikely to change the trend of USD/JPY."
Key Quotes
"The BOJ is widely expected to leave its policy unchanged at today's meeting (8 April). No BOJ watchers expect the Bank to ease at the meeting, according to the Bloomberg survey. February core inflation dropped to 0%, excluding the consumption tax hike impact. However, inflation expectations among corporates and households have been resilient, according to the surveys conducted by the BOJ."
"In addition, large firms have increased base salaries for this fiscal year, at a higher pace than the previous fiscal year. These numbers are not necessarily very encouraging for the BOJ, as the Bank is trying to increase inflation expectations toward 2%. Nonetheless, stable inflation expectations even amid slowing actual inflation should encourage the Bank to keep its policy unchanged for now."
"Even though market expectations for policy change at the meeting are limited, there are some expectations for easing at the next meeting on 30 April. 3 out of 34 BOJ watchers (9%) expect the BOJ to ease on 30 April, according to Bloomberg."
"We think Governor Kuroda is likely to remain optimistic on the inflation outlook and he is unlikely to suggest any further easing in the near future. Governor Kuroda’s optimistic view may disappoint the market, putting pressure on USD/JPY."
At the same time, JPY short positions at IMM have declined to just $2.5bn by 31 March, the smallest amount since October 2012. As BOJ easing expectations into 30 April meeting have also declined over the past few months, the magnitude of USD/JPY depreciation reported at Governor Kuroda’s press conference should be relatively limited, and it is unlikely to change the trend of USD/JPY."