Nomura: Retains Long JPY Bias – tariffs, BOJ, inflation

This comes from the folks at eFX

Nomura: Retains Long JPY Bias Amid Tariff Uncertainty and Domestic Policy Sensitivity
By eFXdata

Synopsis:

Nomura maintains a long JPY bias, citing heightened uncertainty around US tariff policy, the Bank of Japan’s sensitivity to yen weakness, and domestic political focus on inflation control. While the BoJ is not expected to hike earlier than current market pricing, Japan’s policy stance suggests yen-supportive undercurrents remain intact.

Key Points:

⃣ US Tariff Volatility Supports JPY Longs

• Nomura highlights unpredictable US trade policy as a persistent source of market volatility.

• In this context, the yen remains a preferred safe haven despite broader uncertainty.

⃣ BoJ Still Responds to Yen Moves

• BoJ’s January meeting minutes show it remains attentive to JPY depreciation, even without signaling early rate hikes.
• This implies implicit support for the currency, especially if weakness returns.

⃣ Domestic Policy Aimed at Curbing Inflation

• Reports suggest PM Ishiba is pushing for anti-inflation measures ahead of the summer Upper House elections.

• These policies, if implemented, would likely limit inflation risks and cap BoJ policy divergence with the Fed.

Conclusion:

Nomura remains constructive on the yen, citing external tariff-driven volatility, BoJ’s reaction function to FX, and Japan’s political focus on managing inflation. Even without imminent BoJ hikes, the macro and policy mix supports a continued long JPY bias, especially in an environment of rising global uncertainty.

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This article was written by Eamonn Sheridan at www.forexlive.com.