According to strategists, after the Bank of Japan skipped a rate hike, the outlook for the yen is deteriorating, and the central bank's economic statement can be viewed as somewhat dovish.

Saxo Markets stated that compared to the Fed's hawkish stance on Wednesday, the cautious attitude of the Bank of Japan may further drive arbitrage traders to bet on a weaker yen in the future. Nomura Securities believes that attention will now shift to Bank of Japan Governor Ueda's news conference later on Thursday, but his hawkishness is limited.

Here are some comments from various strategists:

Alvin T. Tan, Head of Asian Forex Strategy at RBC Capital Markets in Singapore, stated:

While I do not have high expectations for a rate hike by the Bank of Japan today, the unchanged economic statement is somewhat dovish; however, the opposing votes supporting a rate hike somewhat balance this out. We will closely monitor Ueda's news conference later for any guidance he may provide. There is an expectation that he will hint more strongly at a rate hike in January next year. If he remains completely non-committal, then the upside potential for USD/JPY will be even greater.

Carol Kong, Strategist at Commonwealth Bank in Sydney:

The rise in USD/JPY merely reflects a slight unwinding of positions ahead of a 25 basis point rate increase before the meeting. Ueda may hint at a rate hike in early 2025, which would lead USD/JPY to decline. If not, USD/JPY may rise, possibly reaching last month's high of 156.75.

Charu Chanana, Chief Investment Strategist at Saxo Markets Singapore:

The hawkish stance of the Federal Reserve and the Bank of Japan's pause in rate hikes may provide new arbitrage reasons for yen traders. The only factor hindering new arbitrage trades is increased volatility, which means USD/JPY may face solid resistance at 160 (if not before).

Yujiro Goto, Head of Forex Strategy at Nomura Securities in Tokyo:

Ueda's hawkishness is limited, as there were no changes or surprises in the statement. If Trump's policies, the U.S. economy, and wage negotiations are the reasons for not raising rates, and these are recognized sources of uncertainty, it may be difficult to raise rates in January next year. The Bank of Japan may emphasize that domestic economic and price trends are getting back on track to maintain expectations for January, but it is hard to expect any comments to lead to yen buying. Whether the yen exchange rate can be stabilized around 155 depends on Ueda.

Eugenia Victorino, Head of Asian Strategy at Skandinaviska Enskilda Banken in Singapore:

As the Federal Reserve becomes more hawkish in 2025, the Bank of Japan will have more room to continue tightening policy next year, potentially raising rates again as early as January. However, USD/JPY remains dominated by the Fed's outlook. There was almost nothing that could cause USD/JPY to drop below 154.50 before the market corrected from last night's overreaction to the Fed meeting.

David Forrester, Senior Strategist at Credit Agricole in Singapore:

The Bank of Japan stated that it needs to continue monitoring the impact of fluctuations in financial and exchange rate markets on the economy, but did not mention that the weakness of the yen poses an upward risk to inflation. Importantly, USD/JPY is above 155, which we consider the comfort zone of the Bank of Japan.

Kohei Onishi, Senior Investment Strategist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo:

The Bank of Japan's decision to hold rates steady has relieved the stock market. This decision could provide support for the stock market in afternoon trading.

Article reposted from: Jin Ten Data