JPY: BoJ to keep its policy rate unchanged – OCBC

Japanese Yen (JPY) has strengthened following news that Minister Koizumi has been confirmed as a candidate in the LDP leadership race, OCBC's FX analysts Frances Cheung and Christopher Wong note.

USD/JPY to trend lower is premised on a softer USD

"He is widely viewed as a figure capable of driving generational change within the party and as a proponent of the BoJ policy normalisation efforts. Notably, during his tenure as agriculture minister, he took concrete steps to lower domestic rice prices."

"Regarding the BoJ, we expect the central bank to keep its policy rate unchanged at this week’s meeting but view the October meeting as a live one at this juncture. Our view for USD/JPY to trend lower is premised on a softer USD and Fed-BoJ policy divergence (Fed rate cut cycle to resume while the BoJ to continue its policy normalisation)."

"Fed-BoJ policy divergence and USD diversification theme should still support USD/JPY's broader direction of movement to the downside. Key levels to watch, resistance at 147.66 (50 DMA), 148.70 (200 DMA) and 149.40 levels. Support at 146.20 (50 DMA), 145.00."