Japanese Yen (JPY) and JGBs ignored the Financial institution of Japan Minutes of the June 16-17 coverage assembly, BBH FX analysts report.
BoJ minutes recommend restricted JPY upside regardless of fee hike prospects
“At that assembly, the BOJ unanimously determined to depart the coverage fee at 0.50% and unveiled a plan to gradual the tempo of JGB purchases.”
“Curiously, the Minutes confirmed that ‘A number of members expressed the view that…the Financial institution would seemingly transfer on from its present wait-and-see method and think about resuming the method of coverage rate of interest hikes, if commerce friction was anticipated to progress with out escalation.’ On July 23, the US and Japan struck a commerce deal, suggesting the bar for a BOJ fee hike later this yr is low.”
“The swaps market price-in 50% odds of a 25bps fee improve by year-end and a complete of about 50bps of fee hikes to 1.00% over the subsequent two years. The BOJ is unlikely to lift the coverage fee by greater than is at the moment priced-in, limiting JPY upside. One cause is that Japan CPI much less meals & power has held beneath 2% for over a yr and the economic system reveals little signal of gaining actual momentum.”
