Bank of America Global Research discusses its expectations for this week's BoJ policy meeting.
"The BoJ is expected to keep all key policy targets unchanged at its last meeting of the year, on 18 December. The policy board will likely extend the deadline for its COVID-19 corporate funding support program by 6 months, to Sep 2021," BofA notes.
"Likely absence of major actions by the BoJ in the near future justifies the lack of market interest in its policy. The BoJ's loose monetary policy stance maintains JPY's funding currency status. Since the COVID-19 outbreak, USD has also traded as a funding currency with the Fed focusing on supporting the economy and generating inflation. With the two currencies funding the latest risk asset rally, USD/JPY's volatility has fallen while cross-yen has been driven by risk sentiment. From this perspective, further crowding of positioning in risk assets could pose downside risk to cross-yen (but not USD/JPY)," BofA adds.