This week, Japan is likely to become the only major economy with a negative policy rate. Therefore, economists at Credit Suisse expect the USD/JPY pair to test the 150 level.

JPY vulnerable to further weakness in no-event BoJ outcome

“We do not expect a policy change at this week’s Bank of Japan meeting, given Governor Kuroda’s ongoing commitment to YCC policy.”

“The global trend in rates is a potent force that cannot be either ignored if Japan doesn’t want to risk unhinged JPY weakness, nor offset with empty threats of FX intervention. The big question then becomes how the BoJ messages a change in policy, for example a shift in the YCC target instrument from 10-year to 5-year JGBs. Our base case is that the BoJ rolls this problem to its end-Oct meeting, which leaves USD/JPY likely to test 150.00 by the end of the week if the Fed strikes a hawkish stance again even in the face of threats of direct unilateral FX intervention by Japan.”