8 Aug 2013
Flash: BoJ may sound dovish, time to sell Yen again - RBS
FXstreet.com (Barcelona) - Following yesterday's note in which he warned about the risk of a dovish Bank of Japan, FX Strategist Greb Gibbs, updates our readers ahead of the BoJ monetary policy decision, set to be released anytime from 3 to 5 GMT.
Key Quotes
"Leading into the BoJ meeting today, signals from the data and market suggest the BoJ is losing the battle to invigorate nominal growth and inflation expectations, and thus should think about the case for more monetary easing."
"Kuroda and the BoJ can cling to the idea that the Japanese equity market is relatively strong and reflects the positive influence of their QQE policy, but it has lost upward momentum with a series of lower peaks since the high some time back on 23 May. Kuroda may look at this and at least send a signal that he is concerned by lost momentum in equities and the broader economy."
"As I discussed in a report on 30 July, the causation mostly runs from weak JPY to strong equities (as Kuroda suggested in the above quote). TThe recent fall in the Nikkei and the rise in JPY will almost certainly eventually drive the BoJ to more aggressive policy easing that should weaken the JPY and strengthen equities."
"As it stands ahead of this BoJ meeting USD/JPY is at 96.5, below the low when Kuroda spoke on 29 July of 97.6, and around the close on 4-April on the day Kuroda and the BoJ implemented its QQE policy. If it is tracing out a wedge it is closer now to the bottom of that wedge at 94.8. Considering the risk of a dovish outcome it is time to buy."
Key Quotes
"Leading into the BoJ meeting today, signals from the data and market suggest the BoJ is losing the battle to invigorate nominal growth and inflation expectations, and thus should think about the case for more monetary easing."
"Kuroda and the BoJ can cling to the idea that the Japanese equity market is relatively strong and reflects the positive influence of their QQE policy, but it has lost upward momentum with a series of lower peaks since the high some time back on 23 May. Kuroda may look at this and at least send a signal that he is concerned by lost momentum in equities and the broader economy."
"As I discussed in a report on 30 July, the causation mostly runs from weak JPY to strong equities (as Kuroda suggested in the above quote). TThe recent fall in the Nikkei and the rise in JPY will almost certainly eventually drive the BoJ to more aggressive policy easing that should weaken the JPY and strengthen equities."
"As it stands ahead of this BoJ meeting USD/JPY is at 96.5, below the low when Kuroda spoke on 29 July of 97.6, and around the close on 4-April on the day Kuroda and the BoJ implemented its QQE policy. If it is tracing out a wedge it is closer now to the bottom of that wedge at 94.8. Considering the risk of a dovish outcome it is time to buy."