Key Insights:
1. 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.
2. Market Reactions:
The market remains skeptical about BOJ 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.
3. 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.
4. USD/JPY Projections:
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.
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