Ashish Sinha, Co-Head of Asian FX and Rates Strategy at Bank of America, has remarked that it’s not yet the time for traders to be wary of intervention risks, as political pressure against the depreciation of the yen has weakened.
Intervention might take a “considerable amount of time” to materialize.
In the foreseeable future, the Bank of Japan is unlikely to further adjust its yield curve control, which has given the green light for yen bears and carry traders to re-establish positions.
Until the Bank of Japan abandons its negative interest rate policy, the yen might continue to be used as the funding currency for carry trades, as the focus is on front-end rates rather than the 10-year government bonds.
The abandonment of the negative interest rate policy might not happen until June 2024 after the wage negotiations in April.
Unless there’s an adjustment to the negative interest rate policy, the outlook could remain bullish for the USD/JPY pair.
