USD/JPY: BoJ meeting unlikely to trigger volatility – MUFG

Analysts at MUFG Bank, see the Bank of Japan meeting next week as a low-risk event for the Japanese yen with offsetting yen flow dynamics keeping USD/JPY broadly stable. They see Kuroda’s press conference as a relevant event. 

Key Quotes:

“What has been very notable about the COVID crisis to date has been the remarkable stability of the JPY versus USD. Beyond the extreme initial phase of volatility USD/JPY has been immune to other financial market moves.”

“The key focus next week for the markets will be Governor Kuroda’s press conference. At the meeting on 16th June, Kuroda stated that super-long JGB yields weren’t high compared to other nations – that was taken as a hint of the BoJ seeing scope for the upside for long-term yields. The 30-year jumped from 0.53% up to 0.65% in early July before correcting lower but remains higher than before that meeting.”

“The curve has steepened but could flatten further if Kuroda was to play down this comment next week. That’s unlikely to have much impact on the yen though. The shrinking cost of hedging foreign bond purchases will undoubtedly lead to increased hedging in the current global climate which will help support JPY. Offsetting that might be some deterioration going forward of Japan’s current account surplus.”

“We do not expect any changes to the monetary stance of the BoJ.”