Societe Generale Research discusses the BoJ policy outlook and maintains its bias for short EUR/JPY and short GBP/JPY exposure.
"The correlation between yen and the Japanese curve is something we are watching, but does a steeper and higher curve really undermine the currency? And is the BOJ really considering driving short rates much further below zero and causing more pain on the banking sector? In a country where the other side of the BOJ’s bloated balance sheet is a vast pile of excess reserves in the banking system," SocGen notes.
"Maybe the market is short enough of EUR/JPY that some position-covering is to be expected, but we're having a lot of difficulty seeing how the BOJ engineers a significant currency reversal from here," SocGen adds.