While our call for unchanged policy we made last week did not work out, we feel vindicated by the ‘spirit’ of both the very modest shift in policy and Monday’s very rapid yield-capping intervention.

Our expectation for Q3 is 135-152, and we have seen the 145 level as a natural magnet. If that level were to break, we see little reason for a move to test 150 to not unfold, unless in the meantime there are strong downside surprises for US data. At that point, we suspect the BoJ will be tempted to intervene again in the FX market as it did in Sep/Oct 2022, at which point we would be looking to take profits on long positions.