What next for the yen?

Despite the hype about “bold moves” and “unlimited easing”, the markets have been underwhelmed by the announcements made by the Bank of Japan today. This muted reaction makes sense, as there was little that was unexpected or genuinely new. We anticipate some further weakness in the yen (and gains in the Nikkei) in the first half of the year, assuming global sentiment continues to improve and the market focus simply moves on to speculation about real change at the Bank under a new Governor. But a revival of safe haven demand could see a temporary reversal of these moves later in the year.