In the Asian session on Wednesday (December 21), USD/JPY bottomed out and rebounded, temporarily reporting 131.84, an increase of 0.16%. Japan’s decision to widen the yield target range was interpreted as a sign to test the waters that the BOJ may withdraw from economic stimulus aimed at boosting demand and boosting inflation. But the BOJ remained steadfast in its bond-buying program, saying it was just a fine-tuning rather than the start of a policy reversal.
Mizuho Bank said that the market trend reflects the sudden rush of bets that the Bank of Japan will turn to a hawkish policy, but the market bet does not mean that this is an established policy, nor does it mean the bank’s policy intentions. “Indeed, from the nature of the move or related communiqué, our base case view is that the BOJ will adjust policy to ease pressure on the yen, but not become overtly hawkish, as the BOJ is still trying to emphasize that easing is still on the way. continue.”