Potential impact of Japan and US Elections on BoJ intervention, and monetary policy stance

The Bank of Japan is eyeing two elections. Firstly, this weekend in Japan:

• Japan election weekend – if the yen weakens after, the BOJ could step in with intervention

And secondly, the US election on November 5. MUFG caution that the Bank of Japan may veer away from intervention to support the yen ahead of the US election, reasoning that US dollars spent on propping up the yen would be wasted if Trump wins – the thinking being that a ‘Red Sweep’ (Trump win and Republicans win Congress) would see the US dollar respond with a surge higher.

MUFG do stay, however, that if USD strength/yen weakness comes after the US election the Bank of Japan could hasten its rate hike plans. MUFG expect a BOJ hike in December, with a delay through to January also a possibility.

The Bank of Japan meet next week (October 30 – 31) and then in December, 18 – 19.

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Bank of Japan Governor Ueda spoke on Thursday:

• Ueda: Recent yen fall driven partly by optimism over US economic outlook

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