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Feb 27 - 10:55 AM

SocGen: USD/JPY Close to a Turning Point with BoJ's Expected Policy Shift

By eFXdata  —  Feb 27 - 09:30 AM


Societe Generale (SocGen) discusses the recent dynamics in Japan's inflation rates and its impact on monetary policy, particularly focusing on the implications for the Nikkei Index (NKY) and the USD/JPY currency pair. The "core-core" inflation rate in Japan has settled at 2.2%, prompting debates on the future of negative interest rate policies and yield curve control. The depreciation of the yen since the Covid pandemic onset and its near record-high against the USD are also highlighted as critical factors influencing policy decisions.

Key Insights:

  • Japan's "core-core" inflation rate stabilization at 2.2% may signal the end of negative interest rate policies and yield curve control sooner than anticipated.
  • The significant depreciation of the yen and its position near post-1990 highs against the USD underscore the urgency for policy adjustments.
  • Historical USD/JPY movements indicate potential for drastic fluctuations, recalling its drop from above 160 in April 1990 to under 80 by 1995.
  • Current futures trading shows a predominant short position on the yen, ahead of a crucial Bank of Japan (BoJ) meeting that could mark the beginning of policy divergence reversal with the US.
  • SocGen favors the view that an imminent shift in BoJ policy, possibly preceding a Fed policy change, could signal a turning point for USD/JPY, opposing the consensus short position on the yen.


SocGen's analysis suggests that Japan's inflation dynamics and the depreciating yen are nudging the BoJ towards a pivotal policy shift. The anticipation of this shift, especially in the context of a significant USD/JPY currency pair fluctuation history, has crucial implications for traders and the broader financial market. With a critical BoJ meeting on the horizon, SocGen posits that the prevailing short yen positions might be misguided, expecting a potential reversal in USD/JPY trends as a result of changing monetary policies in Japan and possibly in the US later in the year.

Société Générale Research/Market Commentary


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