BoJ Shift Boosts JPY Amid Hawkish Policy Uptick
Japanese Yen (JPY) is poised for a potential turnaround due to the Bank of Japan's shift towards more hawkish policies, according to OCBC strategists Sim Moh Siong and Christopher Wong. The team believes that intervention risks and the BoJ's policy tightening will gradually support the JPY.
The strategists see faster policy tightening by the BoJ as a key factor in bolstering the Japanese Yen. This shift should ease concerns that the BoJ is falling behind the curve, which had previously weakened the relationship between USD/JPY and US-Japan yield differentials.
As a result, the team now expects USD/JPY to end the year closer to 150-155 rather than their previous forecast of 160. The lower target suggests that the JPY may strengthen in the coming months, which could lead to the Swiss Franc (CHF) remaining the preferred funding currency.
The OCBC strategists also note that progress in channelling domestic savings into Japanese assets has been limited so far, but they expect further policy initiatives to support this objective.