BOJ outlook shift hasn't really translated to the yen - MUFG

There's the saying that if something can't go up on good news, there's bound to be trouble up ahead. And the Japanese yen is definitely stuck in one of those situations.

Even in times of risk aversion with equities retreating this week, the yen is not able to find much comfort. And that says a lot about how traders are viewing the currency at the moment. In times like these, the persisting negative mood will only end when it ends.

In the case pointed out by MUFG, even a shift in BOJ outlook is not helping. And that to me further supports the narrative outlined above.

"Pressure on Japan to intervene again to support yen has increased after the BOJ’s latest rate hike failed to disrupt the weakening trend. The release of the minutes overnight from the June policy meeting indicated support for further rate hikes. The BOJ has become less concerned over downside risks to growth while many members expressed awareness of upside risks to prices. The minutes suggested that one or two members may propose voting for another hike as soon as September or October. One member noted it is desirable ”to consider whether to raise the policy interest rate as appropriate with intervals of a few months in mind".

The Japanese rate market is now pricing in around 16bps of hikes by October. However, market expectations for the BOJ to speed up rate hikes have not yet triggered a stronger yen."

For me, I don't quite see a material shift in the BOJ outlook to be honest. The central bank has played things out as expected of them, given the US-Iran conflict and Japan government pressure. But regardless, it all still fits with the narrative that the yen just simply can't get off the floor.