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JPY: Is a hawkish BOJ pivot coming? What’s next for USD/JPY? – BofA

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Bank of America Global Research discusses its expectations for this week’s BoJ policy meeting.

“We expect the Bank of Japan (BoJ) to keep all key targets,
as well as its forward guidance, unchanged at its upcoming policy board
meeting on Friday, 28 October.
The board is also likely to
leave, intact, the +25bp ceiling for the 10-year yield under yield curve
control (YCC) and reiterate its pledge to conduct unlimited, daily,
fixed-rate bond-buying operations in its defense,” BofA notes.

In the FX space, USD/JPY is likely to retest 150 by the year-end and possibly rise to 155, with 160 in sight. The MoF would likely intervene as USD/JPY attempts new highs. However, considering it would need to maintain a certain level of liquid, foreign reserve balances at a certain level, markets are likely to see the MoF’s firepower as limited and FX intervention is unlikely to be sufficient to stop the upward pressure on USD/JPY.

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