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Yen Tumbles As BoJ Chooses To Remain World's Dovish Dissenter


The BoJ dispelled the doubts and reaffirmed its ironclad commitment to ultra-loose monetary policy, keeping all YCC parameters, overall assessment of the economy and forward guidance unchanged. In an unusual move, the Bank underlined the need to "pay due attention to developments in financial and foreign exchange markets and their impact on Japan's economic activity and prices." Yet this laconic commentary on FX matters fell well short of some of the more aggressive remarks issued by Japanese financial officials in the recent weeks.

  • The yen began tumbling ahead of the BoJ's announcement amid continued assessment of the sustainability of the Bank's dovish stance. FinMin Suzuki's remark that he hopes policymaker would continue to work towards their inflation target appeared to have cooled the enthusiasm of some yen bulls.
  • Spot USD/JPY whip-sawed after the announcement, running as high as to Y134.63, before retracing to its current levels. The pair last deals +186 pips at Y134.07 (and climbing), with the yen still comfortably underperforming all of its major peers.
  • Looking into the options space, as might have been expected, USD/JPY implied volatilities pulled back sharply across the curve, while 1-month risk reversal soared off its lowest levels since March 2020.
  • Demand for USD/JPY boosted the greenback, allowing it to take a breather after Thursday's sell-off and land atop the G10 scoreboard. Firmer U.S. Tsy yields amplified buying pressure.
  • The Antipodeans struggled for any topside impetus as most regional equity benchmarks slipped on a negative lead from Wall Street, while crude oil traded on a softer footing.
  • The focus now shifts to Gov Kuroda's press conference, where he is likely to be quizzed on any potential policy tweaks at the July policy meeting and FX intervention risks.
  • Outside of Japan, final EZ CPI, U.S. industrial output & comments from Fed's Powell, ECB's Simkus as well as BoE's Pill & Tenreyro are eyed today.

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