USD/JPY: Scope to trend lower to 146.00 on a three-month view

Economists at Rabobank analyze the Japanese Yen (JPY) outlook ahead of next week’s BoJ policy meeting.

Risk of a near-term pullback

If the BoJ does exit its negative interest rate policy on March 19, likely, rates will only be raised by 10 or 15 bps. Additionally, at best the tone of the BoJ’s guidance next week is likely to be one of cautious optimism. Importantly, even after the negative policy rate has been consigned to the economic history books, Japan’s monetary policy settings are likely to remain accommodative.

A very guarded tone from the BoJ on the outlook for further policy moves would raise the risk that the JPY could suffer a ‘sell on the fact’ reaction to a BoJ policy change on March 19. That said, despite the risk of a near-term pullback, we continue to see scope for USD/JPY to trend lower to 146.00 on a three-month view.

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