Bank of Japan kept the powder dry

The Bank of Japan surprised markets as it refrained from adding more stimulus at the monetary policy meeting this morning. Today's stance from the BoJ suggests that the bar for additional easing is 'very high' and we now expect the BoJ to continue its current QE programme with an annual target of JPY80trn until 2017.

"We still expect USD/JPY to remain supported by relative monetary policy over the medium to long term, as the BoJ continues to be in easing mode while we expect the Fed to launch a tightening cycle in Q1 16. This should provide some support for the USD around the time of the first Fed rate increase and we still expect USD/JPY to move higher on a 3-6M horizon", says Danske Bank.

"However, given the relatively slight prospects of additional BoJ easing in the coming 12 months, we have lowered our 3-12M forecast slightly to 123 (previously 125) in 3M, and 124 (was 126) in 6M and 12M",added Danske Bank.