BoJ to taper or increase purchases? - Rabobank

Analysts at Rabobank explained that recent Japanese data has been mixed but with inflation still very weak it would seem more likely that the BoJ would be persuaded to increase rather than taper asset purchases.

Key Quotes:

"Even so, we have been arguing that unless US yields push higher a soggy USD will continue to prevent the BoJ from being able to increase the value of the USD/JPY significantly.

We see the risks to USD/JPY, however, as asymmetric and the currency pair could drop heavily if the BoJ was seen to be pulling away from policy accommodation at this juncture. Although the market is hoping that the BoJ can pull something out of its sleeve, there is significant risk that the market will be disappointed.

Not only is it likely that USD/JPY will trade heavily into the end of the year, but without a show of innovation from the BoJ next week scepticism over the outlook for bond buying programmes could also extend."