BOJ not signaling a lack of tolerance for JPY weakness; USD/JPY to remain elevated – CIBC

CIBC Research discusses USD/JPY outlook and sees the pair remains elevated in the near-term.

“It was notable that the recent BoJ policy statement included a rare
FX reference. The BoJ detailed that “It is necessary to pay due
attention to developments in financial and foreign exchange markets and
their impact on Japan’s economic activity and prices.” The currency
reference underlines that the BoJ is not totally immune to JPY
weakness,” CIBC notes.

“Although the monetary authorities are paying attention to
the JPY, they are not necessarily signaling a lack of tolerance for JPY
weakness, rather they are looking to avoid disorderly moves. As the BoJ
signaled that 10-year JGB yields will continue to be capped UST-JGB
spreads point towards USD/JPY remaining elevated,” CIBC adds.

The Japanese CPI report released earlier today showed headline prices up 2.5% compared to 2.9% expected.

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