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25 Apr 2016
Trading the yen around the BOJ - Nomura
Bilal Hafeez, Global FX Strategist at Nomura, notes that while the yen could remain weak into the BOJ meeting, any weakness is unlikely to continue in the weeks after the meeting.
Key Quotes
"On Friday, newswires reported that the BOJ may be considering offering loans with negative rates to banks (unconfirmed, Bloomberg). This contrasts with the earlier negative rates policy on excess reserves held at the BOJ, which in effect forced banks to pay for the privilege of keeping such reserves at the central bank (see Expectations for a BOJ easing rise further). Japanese bank stocks have rallied on the news, and the yen has weakened sharply."
"The pros and cons of such a policy will undoubtedly be much debated, but the more immediate concern will be how the yen will behave running up to and immediately after the BOJ meeting. The main risk is that the full impact of such a move has already played out and so the BOJ will have to surprise with an even bigger package to sustain more weakness in the yen."
"Admittedly, one would also need to assess how other policy measures such as an expansion of the asset purchase programme could impact the yen. However, history suggests that while the yen could remain weak into the meeting, any weakness is unlikely to continue in the weeks after the meeting."
Key Quotes
"On Friday, newswires reported that the BOJ may be considering offering loans with negative rates to banks (unconfirmed, Bloomberg). This contrasts with the earlier negative rates policy on excess reserves held at the BOJ, which in effect forced banks to pay for the privilege of keeping such reserves at the central bank (see Expectations for a BOJ easing rise further). Japanese bank stocks have rallied on the news, and the yen has weakened sharply."
"The pros and cons of such a policy will undoubtedly be much debated, but the more immediate concern will be how the yen will behave running up to and immediately after the BOJ meeting. The main risk is that the full impact of such a move has already played out and so the BOJ will have to surprise with an even bigger package to sustain more weakness in the yen."
"Admittedly, one would also need to assess how other policy measures such as an expansion of the asset purchase programme could impact the yen. However, history suggests that while the yen could remain weak into the meeting, any weakness is unlikely to continue in the weeks after the meeting."