Standard Chartered economists expect the Bank of Japan (BoJ) to end its negative interest rate policy (NIRP) in March rather than April, along with a de facto removal of yield curve control (YCC), while analyzing the implications for the Japanese Yen (JPY).
The possible end of the YCC, accompanied by greater tolerance to the rise in long-term yields, should be positive for the JPY
Although the Yen has rebounded and markets are already forecasting 6 basis point increases in April, we believe the BoJ could surprise with an early move in March. Even if the BoJ does not raise rates in March, the market expects it to do so in April, so the market reaction should be limited in both cases.
Removing the NIRP will not reverse negative yield differentials with other DMs, as the early policy tightening in March is unlikely to signal the start of an aggressive rate-hiking cycle by the BoJ. Nevertheless, a possible end to the YCC accompanied by the BoJ's greater tolerance for higher long-term yields should be positive for the Yenespecially if our expectations that the Fed and the ECB will start cutting rates from June are met.
In this sense, risks tilt to the downside for our forecast of 145.00 in USD/JPY by the end of Q2 2024.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
