Nomura on the Bank of Japan’s path over the next few months
Nomura Research discusses its expectations for next week’s BoJ September policy meeting.
“We see five reasons for the BOJ to consider its changing its
policy framework and rate cuts more seriously over the next few months,
unless major positive surprises from US-China trade negotiations change
the recent trend of global flattening and JPY strength,” Nomura notes.
“1. The efficacy of forward guidance has deteriorated 2. 10yr yield target range has already lost substance 3. The JGB yield curve flattens anyway 4. Yield differential movement keeps supporting JPY 5. The market has priced in a possibility of rate cuts,” Nomura adds.
“The impact of rate cuts on USD/JPY may be muted,
but market positioning has shifted to JPY long positions. Thus, a BOJ
decision to cut rates can still lead to position unwinding and JPY
weakness,” Nomura concludes.
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