NAB: AUD/JPY Seen Holding Around Y89/90 Pivot

NAB note that “JPY regained some of its safe-haven attribute in the recent bank turmoil, weighing down AUD/JPY, but now with concerns easing somewhat, JPY is weaking along with an improvement in risk appetite. The cross now has the potential to sustain a move back above Y90.”

• “The decline in the Japanese headline CPI reading was helped by government energy subsidies, but more importantly from a BoJ’s perspective both the national and Tokyo readings revealed underlying price pressures remain elevated. In our view Japan’s inflation data is yet another piece of evidence that suggests the BoJ ultra-easy policy is inappropriate and indeed counterproductive. Our base case is that YCC will be abolished by the middle of the year, after the Bank has details from wage spring negotiations but inflationary pressures could force Governor Ueda to act sooner.”
• “Japan’s fiscal year end has also played into JPY’s volatility, but as we get closer to the middle of the year we still expect JPY strength to remerge. This means the AUD/JPY cross is seen pivoting around the Y89/90 mark over coming quarters, given JPY strength is seen alongside AUD/USD heading above $0.70.”