Barclays says that they expect the BOJ to begin policy normalisation in Q3 2018
The key upcoming factors that they highlighted in order to determine BOJ policy outlook include:
- Shunto spring wage negotiations, whose results will be announced sequentially starting mid-March
- BOJ's assessment of likely timing to achieve price target in its April outlook report, where retention of current wordings may appear somewhat hawkish
- Government's declaration of "end of deflation"
"Meanwhile, the BOJ is likely to reign in on any speculations for tightening at least through the end of the fiscal year (March)", Barclays argues.
They also highlighted some key levels to look out for, noting that USD/JPY has found a floor at around 105.30 - reversing 76.4% of post-Trump rally (i.e. 23.6% retracement line), with topside remains contained at 38.2% retracement line (and lower end of last year's range) around 107.80.
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Regarding the levels they're talking about, here's the chart - it's the same one I highlighted last week here (just flip around the Fib levels):
