Overseas currency strategists are wary of the risk that the BOJ will be less inclined to raise rates further than the market expects, suggesting that the yen's decline could accelerate. The focus will be on the content of the press conference after the BOJ meeting. Indicators reflecting the BOJ's policy outlook are also drawing attention.
Overseas strategists have pointed to the possibility that the Bank of Japan may be less hawkish than the market expects, warning that the risk of a renewed yen decline is growing. If the BOJ is not inclined to raise rates further, short-term downward pressure on the yen is expected to intensify.
Wells Fargo is recommending that clients bet on a weaker yen, while Citigroup expects the yen to fall to 159 per dollar over the next several weeks. Chris Turner of Dutch bank ING sees the yen falling to the 157–158 range if the BOJ does not signal further rate hikes.
Overnight index swaps (OIS) are almost fully pricing in the possibility of a 25-basis-point BOJ policy rate hike, and expectations are growing that there will be one additional rate hike by year-end. The focus is on Governor Kazuo Ueda's comments at his press conference.
The yen strengthened to 152.89 earlier this month before reversing and falling back to the mid-156 range following the U.S. Federal Reserve's rate decision and guidance on rate hikes. Both short-term downward pressure on the yen and longer-term policy trends are drawing market attention.