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Jan 19 - 12:55 PM

Credit Agricole: Potential for a BoJ Surprise Next Week and Implications for JPY

By eFXdata  —  Jan 19 - 11:15 AM


Credit Agricole analyzes the upcoming Bank of Japan (BoJ) policy meeting, suggesting the possibility of a surprise that could impact the Japanese Yen (JPY).

Key Insights:

  1. Low Expectations for NIRP End:

    • Investors are currently not expecting the BoJ to end its Negative Interest Rate Policy (NIRP) in the upcoming meeting. However, the meeting could still introduce significant volatility for the JPY.
  2. BoJ’s Economic Forecasts:

    • The BoJ will revise its economic forecasts. If the forecasts indicate a prolonged negative impact from the recent earthquake in Northwest Japan on growth and inflation, investor expectations for ending NIRP in 2024 may diminish.
  3. NIRP End Forecasted for 2026:

    • Credit Agricole’s economists predict the end of NIRP only by 2026, contrasting with more immediate market expectations.
  4. Possible Adjustment in Tiering of Reserves:

    • There’s a potential risk that the BoJ may adjust the tiering of local banks' reserves that are subject to the -0.10% policy rate. Such a move might initially be perceived as signaling the nearing end of NIRP, which could positively impact the JPY.
  5. Interpreting the BoJ’s Moves:

    • Despite possible initial positive reactions, Credit Agricole would interpret a tiering adjustment as indicative of a continued NIRP, which could be negative for the JPY.


The upcoming BoJ meeting, while not expected to end the NIRP, holds the potential for significant JPY volatility. Adjustments in economic forecasts and potential changes in reserve tiering could influence market perceptions and the trajectory of the JPY. Credit Agricole advises caution in interpreting these moves, especially in terms of their long-term impact on the Japanese currency.

Crédit Agricole Research/Market Commentary


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