USD/JPY to be supported by an accommodative BOJ – Nomura

Analysts at Nomura expect the October BOJ meeting to show that an exit from the BOJ’s easing policy remains unlikely in the near term.

Key Quotes

“As a result, JGB market volatility will stay relatively low, which would sustain the strong correlation between rate spreads and USD/JPY.”

“We note that foreign bond investment by Japanese investors has been strong so far this month, even amid higher financial market volatility, which is a positive sign for USD/JPY.”

“The BOJ’s forward guidance successfully reduced market expectations of near-term rate hikes by the BOJ, which encouraged Japanese investors to purchase foreign bonds, even amid higher volatility in fixed income markets, unlike in Q1.”

“We raised our USD/JPY forecast last week, and the high likelihood of an unchanged BOJ policy stance means there remains further upside potential for USD/JPY.”