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Feb 20 - 09:55 AM

SocGen: BoJ Policy Change on Horizon, Yen 'Dip-Buyers' Nearing Relief

By eFXdata  —  Feb 20 - 09:00 AM


SocGen anticipates imminent policy adjustments by the Bank of Japan (BoJ), signaling a potential upturn for the yen after a prolonged period of depreciation. Analyzing CFTC positioning data, the firm notes a cyclical pattern of speculative trading that has influenced yen's valuation in relation to US Treasury yields and BoJ's policy stance. The recent resurgence of USD/JPY above 150, aligning with a rebound in US yields and speculative yen shorts, underscores the yen's sensitivity to global rate dynamics and BoJ policy expectations.

Key Insights:

  • Speculative positioning and rate differentials have played significant roles in shaping yen's trajectory, with recent trends indicating a reversion to late 2021 levels of yen shorts and USD/JPY valuation.
  • Strong US economic data and persistent inflation have reignited bullish sentiment for the USD, contributing to the yen's weakening.
  • SocGen suggests that BoJ policy normalization, potentially ending negative interest rate policy (NIRP) and yield curve control (YCC), could be on the table as early as the March 19 meeting, given mounting concerns from Japan's Ministry of Finance (MOF) over the yen's decline.
  • Historical context and current market conditions suggest that a BoJ shift away from NIRP and YCC could mark a pivotal moment for the yen, offering a reprieve to investors betting on its appreciation.


SocGen positions the expected BoJ policy shift as a critical juncture for the yen, foreseeing a potential reversal of its recent depreciation trend. Despite the current pain for yen 'dip-buyers,' the firm anticipates a more favorable outlook in the coming weeks, contingent on the BoJ's readiness to normalize policy amidst global financial dynamics and domestic economic considerations. The analysis underscores the intricate link between global interest rate trends, speculative market positioning, and central bank policies in shaping currency valuations, particularly for the yen in the context of anticipated BoJ actions.

Société Générale Research/Market Commentary


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