With the USD/JPY exchange rate approaching levels that could cause concern for Japanese authorities, there is speculation over whether the Bank of Japan (BoJ) will signal its intention to reduce its asset holdings during the upcoming monetary policy meeting on Friday. Market expectations have been building that the Japanese central bank will begin trimming its monthly bond purchases. While the BoJ has no specific target, the central bank roughly purchases around Yen 6 trillion a month of Japanese Government Bonds (JGBs), in an effort to keep rates low. If the BoJ announces that it will pare back these purchases, a pivot towards quantitative tightening, the Japanese Yen should appreciate across the FX market.
