Credit: REUTERS/THOMAS WHITEOct 28 (Reuters) - The Bank of Japan Policy Board is unlikely to vote for any change in policy at its two-day meeting beginning Wednesday, though Tokyo markets may be setting up for a possible move in December.
Prime Minister Suga's administration is expected to finalise a fresh supplementary budget in December. Many Tokyo pundits believe the BOJ will give the new government a helping hand by easing policy further, mostly likely via fresh quantitative easing to keep term interest rates low.
Such a move would help stimulate an economy already in recovery mode and, perhaps more significantly, widen U.S.-Japan interest rate differentials in favour of the U.S. An added byproduct of more government fiscal stimulus and wider U.S.-Japan rate differentials would be to ensure a floor for USD/JPY not far from current levels.
With JPY the haven of choice for many players heading into the Nov 3 U.S. presidential election,,, such policies could help limit the USD/JPY downside well ahead of 100, with the aid of Japanese importer and institutional investor demand of course ,.
The extension of a broad 100-110 USD/JPY range would be seen by the BOJ and government as a major victory in ensuring currency stability. BOJ preview and comments, , .
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USD/JPY weekly: https://tmsnrt.rs/2HEdWiY
US-Japan yield spread: https://tmsnrt.rs/3jxVdCQ
(Haruya Ida is a Reuters market analyst. The views expressed are his own)
((haruya.ida@thomsonreuters.com;))
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