The Bank of Japan’s hike or hold decision is a 50-50 affair. Economists at ING analyze how the BoJ policy announcement could impact the Japanese Yen (JPY).
The Yen still needs help from USD rates
This will be a binary event for the Yen, given that markets are pricing in around a 50-60% implied probability of a hike this week. Expectations are also for a rate hike to be accompanied by the end of the yield curve control policy, even though the BoJ may well keep its bond-buying programme intact to avert excess bond market volatility.
A hold should push USD/JPY, which can cause the pair to test 150.00, while a hike can trigger a correction to levels below 148.00.
Our view remains that USD/JPY will trade lower from the second quarter, but that relies on lower USD rates as much as a BoJ hike.
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