Commerzbank analysts argue that the Japanese yen will be impacted by two factors if the Bank of Japan monetary policy meeting once again doesn't produce any policy tweak/change:

  • short-term, the carry disadvantage will put pressure on the currency;
  • and long-term, there is a risk that inflation will become so entrenched that monetary policy won't be able to control it without suffering significant fiscal fallout.

Commerzbank lays out a very pessimistic potential risk, saying that uncertainty around whether "equilibrium" JPY exchange rates still exist, or whether there is a possibility of a never-ending depreciation/inflation spiral, is what is exerting pressure on the yen even at its current low level.


Earlier previews:

BOJ is likely to consider raising their consumer inflation projection to around 2.5%

ueda boj Bank of Japan 15 May 2023