The Bank kept its dovish guidance unchanged which forced markets to abandon most speculations of a rate hike already in January. But we identified a few changes in the Bank’s assessment of the economic outlook that likely endorse market’s lingering expectations for a hike in April. We expect the yield curve control to be scrapped in January and a hike to be delivered in April.

The Yen may simply revert to being primarily traded by external factors (US rates in particular) after the BoJ ignored market’s pressures and likely signalled the path to normalisation should be a gradual one.

We remain bearish on USD/JPY in 2024, as the oversold Yen can still benefit from the end of negative rates in Japan and we see the Fed cut rates by 150 bps, but the pace of depreciation in the pair will be gradual in the near term, and we only see a decisive break below 140 in 2Q24.