Oct 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)
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.