Credit Agricole CIB Research discusses its expectations for tonight's BoJ policy decision.
"The BoJ is unlikely to flinch in the face of the weaker JPY and rising inflation when its meeting outcome is released on Friday. So, the central bank’s policy rate and 10Y yield targets will remain at -0.10% and 0%, the latter with an allowed variance of +/-25bp," CACIB notes.
"In terms of the BoJ’s forward guidance, which currently consists of the BoJ expecting “short- and long-term policy interest rates to remain at their present or lower levels”. The most the market can hope for is the dropping of “or lower levels”. But this is also unlikely given the BoJ will be lowering its growth forecasts. A fresh round of dovishness from the BoJ will likely give USD/JPY another boost. Upside will be constrained by the threat of BoJ intervention," CACIB adds.
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