(Bloomberg) -- A stronger yen and selling pressure in the stock market are among the likely outcomes of the Bank of Japan’s meeting on Friday, strategists say.
The central bank kept rates on hold, as widely anticipated, but all eyes now turn to what Governor Kazuo Ueda will say at Friday’s post-decision press conference, scheduled for 3:30pm Tokyo time. Any hawkish rhetoric is likely to bolster the yen, according to Mizuho Securities. It would also put pressure on the shares of Japanese exporters and multinationals whose earnings have been boosted by a cheap Japanese currency, Asymmetric Advisors said.
Here is a selection of comments from analysts:
Mizuho Securities (Shoki Omori, chief desk strategist)
“The focus now shifts to Governor Ueda’s press conference. It is anticipated that he will speak with a cautious yet ‘gradually hawkish’ tone. If the hawkish stance is clearly conveyed to the market, the dollar-yen exchange rate is expected to trend downward. I still see dollar-yen going down to 140 by year-end”
Bank of Singapore (Moh Siong Sim, strategist)
“No fireworks expected and none delivered as BoJ kept rate unchanged. A push higher in long-end Treasury yields could see a consolidation of dollar-yen in a 140-150 range for the next month or two. But hawkish Bank of Japan rhetoric could eventually pave the way for a stronger JPY once the 27 Sep LDP leadership contest and Nov US election have passed”
Asymmetric Advisors (Amir Anvarzadeh, market strategist)
“Although this was a non-event board meeting as almost everyone has been expecting, it’s worth reiterating that Ueda’s comments later will most likely be fairly hawkish as he doesn’t want to see the yen weakening again. Depending on whether I’m right and he makes the hawkish comments, it would mean that the yen will resume its strengthening trend which will resume selling pressure on shares of exporters and multinationals”
ATFX (Nick Twidale, chief analyst):
“We’ve seen a bit of volatility fatigue in the yen after excessive moves over the last couple of days.” Ueda would need to be quite hawkish and guide to a rate hike into year-end in order for the yen to move higher, he said. “If not, then I’d be looking for levels to sell yen into the weekend and next week”
Blue Edge Advisors (Calvin Yeoh, portfolio manager)
“Spot interest-rate differential still supports weaker dollar-yen, but think drivers will shift toward growth expectations. Tactically, I would be biased long dollar-yen here until the next major data point”
Sumitomo Mitsui Bank (Daisuke Uno, chief strategist)
“I doubt the BOJ will be able to raise rates in December. A weaker yen has been supporting the stock market and that in turn has enabled wage hikes. So paradoxically the BOJ won’t be able to raise rates unless the yen is falling”
Lombard Odier Singapore (Homin Lee, senior macro strategist)
“We expect Ueda to reiterate the stance that he and other BOJ officials have been making, which is that the BOJ will tighten again if the economy performs in line with the bank’s outlook and calm returns to the market. We think the yen will grind higher against the US dollar in next 12 months, and the prospect could weigh a bit on the performance of large cap companies that will probably have to revise their FX assumptions for the next fiscal year”
Saxo Markets (Charu Chanana, global market strategist)
“No sense of urgency coming through on further normalization from the BOJ. As long as Ueda follows the same tone, Japanese stocks can continue to enjoy the Goldilocks created from Fed’s jumbo rate cut despite no signs of a recession”
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