Synopsis:

BofA highlights rising market focus on the upcoming BoJ policy decision, noting potential sensitivity to the JPY exchange rate despite reports suggesting no urgency for a December hike. While structurally bearish on the JPY, BofA sees limited room for near-term depreciation.

Key Points:

• BoJ Policy Focus: Market attention shifts toward the BoJ's December meeting amid speculation on a possible rate hike or delay until January.
• Exchange Rate Sensitivity: Reports indicate the BoJ may be more sensitive to JPY levels, influencing its decision-making process.
• JPY Performance: The JPY was the weakest-performing currency this week, driven by positioning rather than fundamental shifts.
• Terminal Rate Pricing: Despite market noise, BoJ terminal rate expectations have remained stable.

Conclusion:

BofA maintains a structurally bearish view on the JPY but sees limited downside in the near term due to market sensitivity around BoJ policy and exchange rate dynamics.