Stronger GDP reduces possibility of a near-term BOJ easing – Nomura

FXStreet (Barcelona) - Yujiro Goto, FX Strategist at Nomura, believes that the stronger Q1 GDP growth would have reduced any chances of further easing by the BoJ in the near-term, and further forecasts USD/JPY to appreciate to 123 levels by end-June.

Key Quotes

“Japanese GDP growth in Q1 was stronger at +2.4% (q-o-q, saar), stronger than the market and we expected”

“Based on the latest Bloomberg survey on BOJ monetary policy, market expectations for a BOJ easing have fallen further since late April. No BOJ watchers expect the BOJ to ease this week, and already subdued expectations for a near-term BOJ easing likely limited USD/JPY depreciation after the stronger GDP.”

“In addition, JPY short positions are likely to be at their lowest level since Abenomics began. Price action after the GDP release confirms smaller JPY short positions at the moment, as well as limited expectations for a BOJ easing.”

“Lower expectations for a BOJ easing and smaller JPY short positions suggest limited downside risk for USD/JPY, and we still feel comfortable with maintaining USD/JPY long positions. We maintain our end-June USD/JPY target at 123, recommending keeping a JPY short bias.”