ING Research discusses the JPY outlook in light of the BoJ’s decision to scale back government bond purchases.

"Rather than irrelevant, this move could be an important kite flying exercise by the BoJ, to assess the impact of any move towards policy normalisation.

Indeed, the prospects of a meaningful taper of the BoJ's Qualitaitve and Quantitative easing (QQE) before the year-end increased markedly today," ING argues.

"The yen has appreciated about 0.5% today on the news even though JGB yields are little changed. Further changes could well provide additional support to the JPY. We are forecasting USDJPY111 by end 2018. Clearly the risks to this forecast have grown today, with a much lower end-year figure now a possibility," ING adds.

Source: ING Global Markets ResearchOriginal Article