The BoJ may be one of the last G10 central banks to reverse out of its extremely accommodative policy settings, according to Jane Foley, Senior FX Strategist at Rabobank.
“BoJ Governor Kuroda was recently forced to deny speculation that the Bank was considering tighter monetary policy in the next year. It was Kuroda’s comments about the reversal rate theory in Zurich in November that had triggered a wave of doubt in the market about the BoJ’s commitment to its QQE programme. This month he downplayed this speculation maintaining that the BoJ needs to continue with “extremely” accommodative policy because inflation remains far from its 2% target.”
“On the assumption that the BoJ remains steadfastly committed to its QQE policy and the Fed continues to tighten policy, the carry trade would suggest that USD/JPY should rise in the months ahead. However, as with this year, periodic surges of demand for safe haven assets suggest that USD/JPY is unlikely to sail a straight course.”
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