USD/JPY: BoJ to leave the yean at the mercy of safe-haven demand – Rabobank

The Japanese yen is the second best performing G10 currency in the quarter to date, just ahead of the safe havens Swiss franc and US dollar. While the Bank of Japan policy is unlikely to be the cause of much support for JPY in the months ahead, safe haven demand could be, according to economists at Rabobank.

Calls for new stimulus to support the domestic economy

“Bearing in mind that the BoJ is committed to allowing inflation to overshoot the 2% target, it is clear that the Bank will remain a laggard within the G10 with respect to policy normalisation.”

“Speculation that Japan’s government may yet announce another fiscal stimulus package is clearly linked with the persistence of covid in the country and Japan’s relatively slow vaccination programme.” 

“Until risk appetite fully returns to EM, it is likely that the JPY will retain a firm stance against a basket of currencies. That said, we expect USD/JPY to trade in a 110 to 111 range on a one-to-three-month view.”