USD/JPY: Reflationist BoJ board shift seen limited – Rabobank

Rabobank’s Jane Foley notes that Prime Minister Takaichi’s decision to nominate reflationist academics to the BoJ Board has unsettled the Japanese Yen and JGBs, but she argues the overall policy tilt is unlikely to change significantly. With Noguchi and Nakagawa leaving, Rabobank still expects only a slightly more dovish bias and maintains a view for lower USD/JPY over the coming months.

Reflationist nominations unsettle Yen briefly

"The decision by PM Takaichi to nominate two reflationist university professors, Sato and Asada, to the Board of the BoJ has unsettled both the JGB market and the JPY today. It is likely that the initial impact will fade."

"The seats that are becoming vacant this year currently belong to Noguchi who is a well-known dove and Nakagawa who has a tendency to vote with the consensus. Noguchi is due to retire in March and Nakagawa’s term ends in June."

"So, while the bias of policy makers could become slightly more dovish, it is unlikely to be a significant shift."

"In view of the latest bout of JPY weakness there is some speculation in the market that the BoJ may hike rates a little sooner in April, though the March 19 policy meeting is widely considered to be too soon given the proximity of the December 2025 rate hike."

"In view of Japan’s emergence from deflation, structural reforms in the stock market, targeted investment programmes, improved business confidence and huge pile of domestic savings we remain optimism that USD/JPY can turn lower in the coming months."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)