Technical Analysis

More on the Bank of Japan’s next move could be removing the negative interest rate

Earlier headline is here:

Goldman Sachs on what the next move from the Bank of Japan is likely to be

More from the Goldman Sachs note (via Bloomberg, gated):

  • “The BOJ’s greater emphasis on the need to enhance the JGB market functioning suggests to us an increased likelihood that it will abandon the negative interest rate policy,” Goldman Sachs Japan economist Naohiko Baba wrote in a note.
  • Such a move would be made to strengthen the sustainability of the BOJ’s yield curve control
  • BOJ is unlikely to widen the target band any further
  • next step will likely be major, such as changing the policy interest rate targets or terminating YCC altogether
  • The negative interest rate is “at the heart of monetary policy” and it’s hard to withdraw it without achieving the BOJ’s inflation target … but terminating it may be seen as the desirable next step, given the burden it has placed on financial institutions and how it’s insulated by global long-term yield trends

USD/JPY gyrations continue, rallies are going to encounter sellers who didn’t manage to get out yesterday.

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