This note is cross-posted from APFX, our rates and FX-focused publication tailored to our institutional clients.
We are sharing the latest BoJ note here for AP Research readers.
The Bank of Japan (BoJ) meeting earlier today was the first major G10 central bank meeting, with many looking for clues on how the respective bankers will position policy amid reflationary pressures.
Not for the first time, the BoJ made a bit of a hash of its meeting, issuing a mismatch of comments that saw the Yen initially appreciate before giving back all gains and then some.
When we dig into the details of the meeting and subsequent press conference, the desire to continue holding our short Yen position (expressed via a long BRL/JPY) remains firmly intact.
SUMMARY
The significant revision higher in inflation forecasts should have merited a precautionary rate hike from the BoJ today.
The 6-3 split, and unclear comments from Ueda, only add to the worry that the central bank doesn’t have a clear vision for policy going forward.
Clear risks of getting behind the curve or hiking aggressively and quashing domestic demand mean we continue to play the Yen from the short side.