Rabobank economists analyze the outlook for the Japanese Yen (JPY) ahead of next week's BoJ policy meeting.
Short-term pullback risk
If the BoJ abandons its negative interest rate policy on March 19, rates are likely to rise only 10 or 15 basis points. Furthermore, at best, the tone of next week's BoJ guidance is likely to be one of cautious optimism. It is important to note that even after the negative interest rate has gone into the economic history books, Japanese monetary policy is likely to remain accommodative.
A very cautious tone from the BoJ regarding the prospects for further policy changes would increase the risk of the yen suffering a “sell-off” reaction to a BoJ policy change on March 19. That said, despite the risk of a short-term pullback, we still see room for USD/JPY to trend lower to 146.00 three months from now.
Source: Fx Street
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