USD/JPY: Easy BoJ monetary policy suggests weaker yen ahead – CIBC

The most recent Bank of Japan decision came and went without fanfare, as monetary policy remains effectively on autopilot. With no end in sight to ultra-easy BoJ monetary policy, economists at CIBC Capital Markets look for yen depreciation ahead.

Clear way for USD/JPY to test 2020 highs of 112.23 into year-end

“Base effects and higher demand, as the state of emergency restrictions are eased into Q4, will encourage a moderate uptick in prices into the year-end. However, as prices are likely to remain well below the target threshold in the medium run, the BoJ is set to remain a policy laggard relative to what we expect stateside.”

“While we expect the LDP will remain in control after upcoming elections, the scale of the likely fiscal injections or scale of regulatory reform will do little to impact either trend growth or monetary policy.”

“With 10-year nominal USTJGB spreads heading towards 155bp for the first time since late H1, the door has opened for the currency to test towards 2020 highs of 112.23 into year-end.”