Credit Agricole: BOJ unlikely to adjust YCC, temporary reprieve for JPY

<p>Credit Agricole has provided their insights
regarding the upcoming July meeting of the Bank of Japan (BoJ) and its
implications for the Japanese Yen (JPY).</p><p>Key Highlights</p><ol><li><p>BoJ's July Meeting Anticipation:</p><ul><li>Investors are looking forward to potential modifications to the Yield Curve Control (YCC) by the BoJ in their July meeting.</li></ul></li><li><p>Inflation Predictions:</p><ul><li>Credit Agricole's Japan analysts foresee a declining inflation trend
in the second half of 2023. Despite some inflationary pressures,
structural barriers like sluggish wage growth and significant
non-financial corporate savings will likely prevent inflation from
consistently approaching the BoJ’s 2% target.</li></ul></li><li><p>Pressure on YCC:</p><ul><li>The BoJ faces diminished pressure to modify its YCC to make it more
sustainable. The reason being, while the market is still predicting more
rate hikes by the Federal Reserve, it concurrently believes that the
climax of these hikes is approaching. This anticipation reduces the
upward pressure on the 10-year JGB yield.</li></ul></li><li><p>Likely Outcome:</p><ul><li>Given these factors, Credit Agricole predicts that the BoJ will not
make any significant changes to its YCC in the upcoming July meeting,
which could lead to some disappointment among investors.</li></ul></li><li><p>JPY Outlook:</p><ul><li>Any relief for the Japanese Yen stemming from potential positive surprises in inflation is expected to be short-lived.</li></ul></li></ol><p>Summary</p><p>Credit Agricole speculates that the Bank of Japan will maintain its
current stance in the upcoming meeting and not introduce any significant
adjustments to its Yield Curve Control. This is due to a variety of
reasons, including anticipated lower inflation in the latter half of
2023 and lessened market pressures. As a result, investors hoping for
changes in the BoJ's policy are likely to face disappointment, and any
boost for the JPY due to inflation surprises will probably be fleeting.</p><p>For bank trade ideas, <a href="https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD" rel="nofollow" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD&amp;source=gmail&amp;ust=1690382955814000&amp;usg=AOvVaw3FAZU_sdrSeCaZK9dwbgRC">check out eFX Plus</a>. For a limited time, get a 7 day free trial, basic for $79 per month and premium at $109 per month. <a href="https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD" rel="nofollow" target="_blank" data-saferedirecturl="https://www.google.com/url?q=https://plus.efxdata.com/ad/track/4655172E54F06040571CD0AB083845AD&amp;source=gmail&amp;ust=1690382955814000&amp;usg=AOvVaw3FAZU_sdrSeCaZK9dwbgRC">Get it here</a>.

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This article was written by Adam Button at www.forexlive.com.