The Bank of Japan (BOJ) is signaling a potential policy shift as inflation remains above its 2% target and wage growth shows signs of picking up. If the BOJ pivots toward tighter monetary policy, this would likely trigger a significant appreciation of the yen.

Policy Divergence: The Fed appears to be at ta more relaxed way of higher for longer while the BOJ may tighten, narrowing the yield differential.

Carry Trade Unwind: A BOJ shift could force traders to unwind yen-funded carry trades, amplifying yen strength.

Risk Sentiment: Safe-haven flows may further support the yen if global uncertainties increase.

SHORT USDJPY

Jan 16 2025