BoJ: Dovish stance remains intact – Nomura

The BOJ left its policy unchanged yesterday, as widely expected while inflation forecasts were lowered broadly, albeit slightly, from FY2018 to FY2020, and dovish forward guidance was also left unchanged, points out the research team at Nomura.

Key Quotes

“Governor Kuroda clearly ruled out the possibility of a wider range for 10yr yield trading. Thus, Japanese financial market volatility will likely stay low, even though the BOJ announced further operation tweaks to improve the functionality of the JGB market.”

“As a result, USD/JPY may follow wider rate spreads between the US and Japan, while Japanese investors’ foreign portfolio investment will also likely stay strong.”

“The BOJ’s unchanged dovish view will likely ensure recent JPY weakness is maintained, and we expect USD/JPY to rise toward 115 by end-December.”