Investing.com – Following the decision by the Japanese monetary authority to maintain interest rates at 0.10%, having previously abandoned the ultra-loose policy with negative rates, the perception with the end of bond purchases later than expected is that the yen will weaken, Julius Baer pointed out in a note Friday. The projection is for a devaluation to 160 USD/JPY, from the current 157.46.
“Bond purchases will now be phased out cautiously and will only begin in July. The end of bond purchases later than expected and unchanged interest rates disappointed and weakened the yen,” pointed out the Swiss group.
David Kohl, chief economist at Julius Baer, says details on how bond purchases will be gradually phased out are expected only at the next meeting, which would have disappointed investors.
“A tightening of policy at the next meeting is now very likely, but will most likely be implemented cautiously,” adds Kohl, who projects a ten basis point rise in rates in July.
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