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12:45:55 29-02-2024

BoJ: Exit from ultra-loose monetary policy is positive for the Yen in the short term Commerzbank

Preparations for an imminent Japanese interest rate turnaround by officials continued apace. Michael Pfister, FX Analyst at Commerzbank, analyzes the implications for the Japanese Yen (JPY) of ending negative interest rate policy.

The signs of a BoJ interest rate turnaround continue

With each new statement, it becomes clearer that the BoJ wants to end its negative interest rate policy in the near future, even though the second-round effects in Japan are not yet really visible. In the short term, such an exit is certainly positive for the Yen.

It is certainly possible that this is yet another failed communication attempt by the BoJ. If this is true, and the BoJ dares to make more than a symbolic exit from its negative interest rate policy in the coming months, it would be another major disappointment for market hopes, as we have seen several times in the past two years. Such a disappointment would certainly be clearly negative for the JPY.

However, the likelihood of this happening is likely to diminish with each subsequent statement. Therefore, the exit from ultra-loose monetary policy now seems to be rapidly approaching. In the longer term, such an exit could pose some risks for the Yen. In the short term, however, I would not bet against the Yen in the coming months as I did a few months ago.

 

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