Researchers at UOB Group assessed the recent BoJ meeting and gave a view on the potential path of USD/JPY.
Key Quotes
“The Bank of Japan (BOJ) decided to keep policy unchanged for the 11th consecutive meeting in January 2018. And the decision was again not unanimous with board policy member, Goshi Kataoka, the sole dissenter for the 4th time in a row”.
“The BOJ retained its upbeat economic outlook and its optimistic inflation outlook that Japan continues to head towards the 2% price growth target (“likely be around fiscal 2019”) but there was no material revision to either GDP or inflation forecasts”.
“Even as BOJ chooses to maintain status quo, uncertainty will continue to cloak its monetary policy outlook in 1Q 2018 as the specter of “BOJ normalization” has crept into market psyche. It will only be dispelled after the announcement of the appointment of the next BOJ Governor, and thereafter market’s BOJ policy expectations will revert back to “expansionary till 2% is met”.
“We continue to highlight the risk of temporary USD/JPY downside towards 108 by end-1Q18. Thereafter, JPY weakness should resume anew, lifting the pair back up to 115 by end 2018”.
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