BoJ

Whether it’s any major FX pair against the yen or the Nikkei 225, the last of least resistance right now seems to be higher with the BOJ maintaining its ultra-dovish stance.

Whether it’s any major FX pair against the yen or the Nikkei 225, the last of least resistance right now seems to be higher.

USD/JPY is trading 40 pips away from multi-decade highs as upstream inflationary pressures in Japan are coming off hard. Perhaps that explains we've had no verbal intervention attempts from the government today?

If you believe the Fed is done hiking rates and will be forced to ease policy aggressively next year, it’s hard to be bullish USD/JPY or the Nikkei 225 given the role yield differentials and FX fluctuations have played in underpinning both this year.

Japan’s Nikkei 225 has endured a whirlwind 24 hours, mirroring the USD/JPY in the wake of the Bank of Japan’s (BPJ) October monetary policy meeting. It’s surged more than 1000 points from the lows hit on Tuesday, largely reflecting stiffening tailwinds for Japanese exporter earnings.

USD/JPY and Nikkei 225 are rising in the wake of the Bank of Japan’s (BOJ) latest interest rate decision, reacting to a smaller-than-expected adjustment to the banks yield curve control (YCC) program.

1-day implied volatility has blown out on USD/JPY ahead of today’s BOJ meeting, with its 100-pip implied move coming in at 292% of its 20-day average and the 5-day implied volatility sitting at 179 pips.

USD/JPY is showing signs of rolling over, but remains in a longer-term uptrend ahead of the BOJ and Fed

Underlying inflation in Tokyo came in well above expectations for October, a potentially important development for USD/JPY and the future of the BOJ's yield curve control program.

We have a busy calendar with what would usually be ‘red flag’ days, including central bank meetings with the FOMC, BOJ and BOE. There’s a reasonable chance we’ll see no action across all three, but the bigger response for global markets could be if the BOJ widen or abandon their yield curve control (YCC).

Speculation surrounding the future of the Bank of Japan’s (BoJ) yield curve control program continues to thwart attempts to push USD/JPY higher, combining with the threat of intervention from the BOJ to cap on rallies in the pair.