Dovish Bank of Japan paves the way for further yen depreciation, analysts say – 160 yen possibility – Bloomberg

Market participants view the Bank of Japan’s decision to leave most of its current policy unchanged at its monetary policy meeting on the 26th as a dovish move, and analysts and strategists say it is likely to lead to further yen depreciation. pointed out.

Some strategists predict that the yen could weaken to 160 yen to the dollar. Other strategists say credit spreads could widen. Many believe that the possibility of foreign exchange intervention by Japan’s monetary authorities has increased. Bank of Japan Governor Kazuo Ueda will hold a press conference at 3:30 p.m.

Views of market participants

●Mr. Calvin Yao of Blue Edge Advisors

• The outcome of the Bank of Japan meeting is nothing but sushi.It’s just a rice ball with just rice.
• With Japanese government bonds losing their upward momentum, the yen is once again at the mercy of foreign interest rates.

●Yujiro Goto, Chief Foreign Exchange Strategist, Nomura Securities

• Regarding the language in the Bank of Japan’s statement regarding government bond purchases, the implementation is in line with the policy decided at the March meeting, so it may be more of an omission than a deletion.
• Preliminary reports had raised expectations for discussions on reducing government bond purchases, but the statement was quite simple.
• I don’t know how strictly the annotation part is handled, but isn’t it a clear enough change to delete it?
• Although some parts are difficult to read, the perception is that there has been no clear change, and yen selling is occurring due to government bond buybacks and the passage of events.
• Governor Ueda’s press conference is also attracting attention, but since the dollar and yen have passed the Bank of Japan event, they have exceeded 156 yen, so we are keeping an eye on whether there will be an intervention like the one in September 2022.

●Aozora Bank’s Akira Moroga Chief Market Strategist

• There were hopes that the “6 trillion yen per month” figure would be removed from the government bond purchases.Price outlook has been raised, but not hawkishly enough to raise interest rates in July
• The overall performance was not as expected, and the yen weakened due to disappointment.
• There was no change in the government bond purchase operations in the statement, but it can be reduced if the government wishes to do so.The Bank of Japan’s governor’s press conference and the purchase schedule for May announced at the end of April will likely be assessed.
• The governor’s press conference is unlikely to be content that will cause the yen to appreciate.If the yen depreciates further following the press conference, it would not be surprising to see yen-buying intervention, as in September 2022, regardless of the level.

●Charu Chanana, Head of Currency Strategy at Saxo Capital Markets

• The Bank of Japan once again showed it is capable of dovish surprises that surprise even the most dovish expectations.
• Markets are likely to reaffirm their confidence in carry and continue testing the limits of yen weakness
• There is a possibility that the yen’s exchange rate against the dollar will accelerate, aiming for 158-160 yen per dollar, and the Ministry of Finance’s Finance Minister Masato Kanda set the threshold for intervention as “a 10 yen depreciation in one month.” ” gives room for further growth.
• Without a concerted effort, any intervention will be ineffective unless supported by a hawkish policy message.

●Takehiko Masuzawa, Trading Head, Stock Department, Philip Securities

• Those who had been preparing for the emergence of clues regarding policy revisions and hawkish content are buying back stocks, leading to a weaker yen and higher stock prices.
• The market appears to be moving due to the elimination of risk positions, but there are many things that cannot be determined from what we can currently read in the materials, and there is also a growing sense of caution about yen-buying intervention, which will likely reduce the rate of increase in stock prices.
• Monetary easing is expected to remain accommodative for the time being, giving a dovish impression.
• However, the document was short at three paragraphs, and details that could not be immediately interpreted, such as the amount of bond purchases, were deferred to the press conference.
• The yen is likely to weaken as there is demand from domestic companies to buy dollars ahead of the holidays.

●Harumi Muguruma, Chief Fixed Income Strategist, Mitsubishi UFJ Morgan Stanley Securities

• The Bank of Japan has not responded to the yen’s depreciation, and it is hard to imagine Governor Ueda becoming more hawkish at his press conference.
• The statement states that long-term government bond purchases will be carried out in accordance with the policy decided at the March meeting, and nothing has changed in reality.
• Next, the focus will shift to the government bond purchase schedule announced on the 30th and the Financial Markets Bureau’s operations.
• The outlook report states that there is a higher risk of upside in prices in FY2016, but after that, prices have generally been balanced, as expected.
• If the yen’s depreciation does not stop, there is a high possibility that the market will become a stimulus market that will put pressure on the Bank of Japan to bring forward interest rate hikes and quantitative contraction.

●Katsutoshi Inadome Senior Strategist, Sumitomo Mitsui Trust Asset Management

• There was a report last night that the scale of government bond purchases would be reduced, so I braced myself, but the government explained that it would maintain its current policy and there was no new information.
• The initial reaction is to buy, but we will have to confirm the specifics at President Ueda’s press conference before deciding whether to proceed with the purchase.

●Hidetoshi Ohashi Chief Credit Strategist at Mizuho Securities

• The inflation rate is the biggest factor in determining the level of government bond yields and policy interest rates, rather than the presence or absence of government bond purchases.
• It appears that many issuers are considering issuing corporate bonds in May.
• In the secondary market for corporate bonds, supply and demand in the 10-year zone have weakened over the past week, and if investors believe that interest rates will continue to rise, the weakening in supply and demand may continue.