USD/JPY: Delayed BoJ exit from negative rates unlikely to trigger another sustained Yen sell-off – MUFG
The Yen has continued to recover lost ground following the heavy sell-off earlier in the week in response to the BoJ’s latest policy update. Economists at MUFG Bank analyze JPY outlook.
What’s needed for USD/JPY to stage a more sustained rebound?
The price action supports our view that a delayed BoJ exit from negative rates is unlikely to be sufficient in the current external environment to trigger another sustained sell-off for the Yen at a time when there is intensifying speculation that other major central banks will begin to cut rates earlier and deeper next year.
For USD/JPY to stage a more sustained rebound, market participants would have to more seriously question whether the Fed will deliver earlier and deeper rate cuts currently priced into next year. The next important text of that view will be provided by the release tomorrow of the latest US PCE deflator report for November. In light of the already released softer-than-expected PPI report for November, the report appears more likely to provide further evidence of slowing inflation that supports current market expectations for the Fed to move rates into less restrictive territory next year.
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FXStreet Insights Team
FXStreet
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