Ahead of the Bank of Japan (BoJ) decision, economists at Credit Suisse still expect the USD/JPY to trade on a solid foot.

Limited prospect for a major turn in actual BoJ policy before April 2023

“Last week, we said we were not inclined to fade USD/JPY strength, even with the pair trading near our 150 target. With no visibility on the outcome of this week’s BoJ decision and no strong indications that a change is imminent beyond a shift in market expectations, we still do not see a strong urge to adopt a different approach for now.” 

“In the event that the BoJ was indeed to signal a change in forward guidance, a dip further towards the lower end of our Q4 140-150 target range is possible, but far from a given, given the backdrop of already fairly aggressive market expectations.”

“We are also sceptical of the view that a minor change in forward guidance would trigger a deeper or longer-lasting correction, given our sanguine view on Fed tightening and the still limited prospect for a major turn in actual BoJ policy before the end of Governor Kuroda’s term, in April 2023.”