Commerzbank's two factors that'll prompt a weaker yen if the BOJ holds steady policy

<p>Commerzbank analysts argue that the Japanese yen will be impacted by two factors if the Bank of Japan monetary policy meeting once again doesn't produce any policy tweak/change: </p><ul><li>short-term, the carry disadvantage will put pressure on the currency; </li><li>and long-term, there is a risk that inflation will become so entrenched that monetary policy won't be able to control it without suffering significant fiscal fallout.</li></ul><p>Commerzbank lays out a very pessimistic potential risk, saying that uncertainty around whether "equilibrium" JPY exchange rates still exist, or whether there is a possibility of a never-ending depreciation/inflation spiral, is what is exerting pressure on the yen even at its current low level.</p><p>—-</p><p>Earlier previews:</p><p><a href="https://www.forexlive.com/centralbank/boj-is-likely-to-consider-raising-their-consumer-inflation-projection-to-around-25-20230724/" target="_self" rel="follow">BOJ is likely to consider raising their consumer inflation projection to around 2.5%</a></p><ul><li><a href="https://www.forexlive.com/centralbank/goldman-sachs-are-still-expecting-the-bank-of-japan-will-tweak-ycc-policy-this-week-20230724/" target="_blank" rel="follow" data-article-link="true">Goldman Sachs are still expecting thee Bank of Japan will tweak YCC policy this week</a></li></ul><ul><li><a href="https://www.forexlive.com/centralbank/mufg-are-expecting-a-bank-of-japan-yield-curve-control-tweak-at-this-weeks-policy-meeting-20230724/" target="_blank" rel="follow" data-article-link="true">MUFG are expecting a Bank of Japan Yield Curve Control tweak at this week's policy meeting</a></li></ul><ul><li><a href="https://www.forexlive.com/centralbank/boj-meet-this-week-mufg-still-expect-ycc-tweak-but-their-confidence-ebbing-yen-scenario-20230724/" target="_blank" rel="follow" data-article-link="true">BOJ meet this week. MUFG still expect YCC tweak but their confidence ebbing. Yen scenario.</a></li></ul><ul><li><a href="https://www.forexlive.com/centralbank/bank-of-japan-meet-this-week-july-27-28-no-change-seen-to-yield-curve-control-ycc-20230723/" target="_self" rel="follow">Bank of Japan meet this week, July 27-28 – no change seen to yield curve control (YCC)</a></li></ul><ul><li><a href="https://www.forexlive.com/centralbank/october-is-now-the-month-most-cited-as-the-likely-timing-for-a-boj-policy-change-20230720/" target="_blank" rel="follow" data-article-link="true">October is now the month most cited as the likely timing for a BOJ policy change</a></li></ul><ul><li><a href="https://www.forexlive.com/centralbank/bank-of-japan-governor-ueda-comments-this-week-have-watered-down-ycc-tweak-expectations-20230719/" target="_self" rel="follow">Bank of Japan Governor Ueda comments this week have watered down YCC tweak expectations</a></li><li><a href="https://www.forexlive.com/news/weekly-market-outlook-24-28-july-20230723/" target="_self" rel="follow">Weekly Market Outlook (24-28 July)</a></li><li><a href="https://www.forexlive.com/centralbank/week-ahead-highlights-include-fomc-us-gdp-pce-ecb-boj-flash-pmis-20230723/" target="_self" rel="follow">Week ahead highlights include: FOMC, US GDP, PCE; ECB, BoJ; flash PMIs</a></li></ul>

This article was written by Eamonn Sheridan at www.forexlive.com.