MUFG expect the Bank of Japan to begin to tighten policy next week.

The Bank of Japan meet on March 18 and 19. Every meeting for the past two years or so has been eagerly awaited for an exit out of ultra-easy policy. But, finally, the time seems to near. If not at this March meeting then April (25 and 26) is the expectation.

MUFG on what’s ahead:

• We continue to expect positive wage negotiation results this week to give the green light for the BoJ to begin to tighten policy next week.
• To dampen the market impact from exiting negative rates and yield curve control, the BoJ will be keen to emphasize that it will be a gradual process of policy normalization unlike the aggressive rate hike cycles implemented by other major central banks in recent years.
• If the BoJ delivers cautious forward guidance alongside hiking rates that casts doubt on the need for further hikes, it could result in the Yen weakening further in the near term by encouraging the use of Yen-funded carry trades.

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Mitsubishi UFJ Financial Group is a Japanese financial services group that is the largest in the world measured by assets.

USD/JPY update, a wee bit higher on the session:

This article was written by Eamonn Sheridan at www.forexlive.com.