The inflation target has been met for 16 consecutive months but the reflation narrative has lost some steam recently.
We think the data supports another tweak of the yield curve control (YCC) this year, most likely in October, as one last step ahead of completely dismantling YCC.
We expect enough reflation traction for the BoJ to hike its policy rate to zero in Q2 2024. However, we think there is a long way to a situation where the BoJ can tighten much further than that.
We forecast USD/JPY towards 130 on 6/12M horizon, primarily as we deem long US yields are at (or around) peak and that the global environment favours the JPY.