An Early BoJ Meeting?
USDJPY broke to new multi-year highs overnight after a Nikkei newspaper article suggested an unscheduled BoJ policy meeting may happen “immediately after” the new leadership takes office on March 20th. The article did not cite any sources (named or unnamed) and seemed to be based purely on the newspaper’s interpretation of remarks Kuroda made during his parliamentary testimony on Monday. Kikuo Iwata who has been nominated for one of the deputy governor roles was quizzed about this overnight during his own parliamentary hearing, but he said the possibility of an extra meeting was not yet being discussed (although he did not rule one out). That said, we note an early meeting would not be beyond the bounds of possibility. First, even the Shirakawa-led BoJ held an unscheduled extra meeting in Dec. 2009 where new easing measures were discussed. Second, holding a preliminary meeting two weeks early would allow time for BoJ staff to study the practicalities of any new easing proposals before a final decision could be made at the scheduled meeting on April 3-4. At the very least, this possibility has now been planted in the minds of investors, meaning USDJPY is likely to stay bid in the lead-up to the transition of power. It also encourages market perceptions that Governor-nominee Kuroda understands the importance of surpassing market expectations when t h e opportunity to do so presents itself.
Click here to read the full report: UBS Morning Adviser
UBS Investment Bank