USD/JPY: tugged and pulled on BoJ expectations - Scotiabank

Analysts at Scotiabank explained that USD/JPY is outperforming all of the G10 currencies on the back of shifting expectations for fiscal stimulus following comments from Finance Minister Aso in which he failed to deliver details surrounding the size of the much-anticipated package set to be announced around the end of July.

Key Quotes:

"Aso’s evasive comments follow last week’s oddly-timed release of interview comments from BoJ Gov. Kuroda in which he pushed back on expectations of greater monetary policy experimentation—their combined impact serving to shift market participants’ expectations in a JPY-supportive manner. Flows are dominating as we consider USDJPY’s decline and divergence to both fundamentals (U.S-Japan 2Y yield spread widening in a USDJPY-supportive manner) and measures of sentiment (risk reversals softening the premium for protection against USDJPY downside)."