USD/JPY tags 150.00 then rebounds. Eyes on the Bank of Japan

I don’t envy Kazuo Ueda.

The Bank of Japan governor faces the task of unwinding the world’s most-aggressive policy of QE and ultra-easy rates in the world’s most-indebted country.

He took a small step towards less-aggressive policy on Tuesday and that has helped to prop up the yen. Earlier today, Reuters reported that the BOJ will “look to exit the decade-long accommodative regime sometime next year” but it will be tough. The report cites interviews with six sources familiar with BOJ thinking.

“Given uncertainty over the economic outlook, the BOJ probably wants to
wait at least until spring next year in normalising policy,” said
another source. “If so, it makes sense to keep the BOJ’s guidance
dovish.”

The aim will be to do it gradually. So far the trend has been to leak larger steps and then announce smaller ones and that’s kept both the FX and bond market off balance. The report today helped to send USD/JPY through 150.00 and down to 149.85 but it’s since rebounded to 150.44. A big portion of that is from the US dollar side as it weakens broadly following the Fed and Treasury refunding announcement.