What will the yen do after the Bank of Japan announcement tomorrow?
For that matter, what's it going to do now in the lead up?
Here's the view from Goldman Sachs, both on the fiscal package and the BOJ (bolding mine). Its focused on the stock market reaction, but I think we can imply the yen moves from this anyway:
What has been the stock market impact of fiscal packages? Based on our event study, we draw the following conclusions:
Our event study of 25 economic stimulus packages since 1990 shows that while the market often rallied in anticipation of a package, it underperformed or declined in the first month post-Cabinet approval in 18 out of 25 occasions (72%) (see Exhibit 2).
Surprisingly, there was little correlation between the size of actual expenditures and the market's reaction (see Exhibit 3). Given the market's more than 8% rally since July 8, we believe much of the stimulus news has been discounted, and we retain our 12-mo TOPIX target of 1300.
Therefore, unless the BOJ and/or government deliver significant surprises in the form of monetization or much larger real fiscal spending, we see a decent chance that the market's rally could fade during the next several weeks.
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ps. I posted on the UBS view already today: UBS on the yen after the BOJ: "Most of the move has already occurred"
