USD/JPY - what to believe? - Rabobank

"In a speech on December 26, Bank of Japan Governor Kuroda stated that “the Bank will continue to persistently pursue powerful monetary easing under the current QQE with Yield Curve Control”," Rabobank analysts note.

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The market, however, is doubting his word.  For the past couple of months speculation has been rising regarding the likelihood of a step back by the BoJ from its ultra-accommodative momentary policy settings.  This has already translated into a firmer tone in the JPY.  The BoJ policy meeting on January 23 will be very closely watched by the market and has the potential to send USD/JPY in either direction.

That said, for now we are betting on Kuroda restating his dovish position. Without firm evidence that the BoJ will change tack, the risk is that the JPY will give up its recent gains.  For this reason we retain a forecast of USD/JPY 116 on a 12 mth view.  That said, we will be following the actions of the BoJ carefully in 2018.