How to trade BoJ – GS, RBS

29 October,, London – Having Friday’s BoJ around the corner, Goldman Sachs and RBS examine USDJPY implications to possible BoJ actions. Don't wonder how to trade BoJ anymore.

Goldman Sachs

Goldman’s Japan economists have long expected further easing from BoJ at the 30 October meeting amid soft activity and declining inflation expectations.

“Our base case is for the BoJ to undertake: a maturity extension of existing JGB purchases, an increase in the run-rate of JGB purchases from 80 to 90 JPYtn per year, and an increase in ETF purchases from 3 to around 5 JPYtn,” GS projects.

Although the call is a close one, the BoJ will need to loosen the policy eventually, as their inflation outlook drifts further out of sight.

Therefore, GS expects further USDJPY upside pressure, "we think USDJPY should move through 125 in the wake of the meeting should the BoJ ease as we expect.” Moreover, with an IOER cut an outside chance, the long USDJPY risk – reward appears favorable, GS adds.


In contrary to Goldman Sachs' expectations, RBS' base case scenario remains for BoJ to withhold resulting in a sharp post-BoJ rebound in the yen.

“If the BoJ stays on hold and only marginally lowers forecasts, dollar-yen will fall sharply back into its recent 115-120 range,” the major bank projects.

RBS identified four most probable outcomes for the Friday’s meeting.

First and the most likely scenario, with probability of 40%, is for the BoJ to stay on hold and only marginally lower its outlook, “dollar-yen will fall sharply back into its recent 115-120 range,” the analyst point.

Second outcome with probability of 30% is for the BoJ to stay on-hold but significantly downgrade its outlook. USDJPY would likely be longed after dips below 119 – 120, the bank notes.

“If the BoJ eases modestly by only raising ETF, REIT purchases, dollar-yen will succumb to profit-taking and fall below 120,” the bank describes the third scenario accounting for 15%.

Lastly, if the BoJ would ease the policy sharply by raising its ¥80trn JGB yearly buying, USDJPY would trade in a higher 120 – 125 range, RBS finished.

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