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BOJ Review - September 2020: Playing A Straight Bat

Playing A Straight Bat

  • All in all, there were no surprises at the latest Bank of Japan (BOJ) monetary policy decision as the BOJ played a straight bat, meeting broader expectations in all of the major areas of communique.
  • The monetary policy settings and forward guidance were left unchanged, while the BOJ provided a slightly more upbeat view on the economy, albeit with a sense of caution evident, which is more than understandable given the current climate. This move was widely telegraphed and predicated on familiar themes.
  • Governor Kuroda's press conference provided little of any real substance:
  • Looking ahead, relative real-yield dynamics between U.S. Treasuries and JGBs will come under scrutiny, as will the general trend in the USD/JPY currency pair. Of course, these matters are interlinked, and relative strength in the JPY against the USD may result in some verbal pushback from the Bank if the rate moves too far below the acceptable tolerance level for policymakers. Indeed, Kuroda noted that the Bank continues to closely watch developments on this front, with wider beliefs that the Bank would be uncomfortable with a sustained move through Y105 towards Y100 in the USD/JPY cross.
  • As we mentioned in the run up to the decision, the BOJ's quarterly Tankan survey will be the next major economic release (scheduled for October 1), with the capital expenditure metric (and trend thereafter) set to come under heightened scrutiny.

BOJ Review Sep 2020.pdf

MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com
MNI London Bureau | +44 0203-865-3809 | anthony.barton@marketnews.com

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