The BoOJ won’t hike rates, but we see a 50% chance that the de-facto cap on the 10-year JGB yield will rise from 1% to 1.5%.

USD/JPY continues to track yield differentials, so it’s hard to see how we can avoid a reaction one way or the other from the decision on Tuesday.

If they keep the cap unchanged, we will probably see another spike above USD/JPY 150 and more intervention talk.

If they raise the cap, every 10 bps JGB yields rise relative to Treasuries can drag USD/JPY down by about 2%, and take EUR/JPY down by as much or more.