Société Générale (SocGen) analyzes the implications of the recent Bank of Japan (BoJ) policy meeting and its effect on the USD/JPY currency pair, forecasting a decline in the coming months.
BoJ Meeting Outcomes:
- The BoJ maintained its current policies but indicated positive prospects for wages and inflation, along with concerns about the side-effects of negative rates and yield curve control, suggesting possible policy changes by mid-2024.
- The market remains skeptical about BoJ's policy change, but the yen is supported by a calmer U.S. bond market and China's potential equity market support plan, financed through repatriation of foreign currency holdings.
Yuan and Other Currencies:
- The Chinese yuan, Australian dollar, and South Korean won have risen slightly more than the yen in response to these developments.
- Based on yield forecasts, SocGen contends that USD/JPY should currently be closer to 140 than 150 and is likely to fall below 140 in the second quarter of 2024, ending the year around 135.
SocGen maintains a cautiously optimistic outlook for the yen, anticipating a significant decline in the USD/JPY pair in the near future. This prediction is influenced by potential changes in BoJ policy, global bond market trends, and financial activities in other major economies like China. The forecast underscores the interconnected nature of global financial markets and the influence of central bank policies on currency values.