(Bloomberg) -- The Bank of Japan largely left its monetary policy settings unchanged Friday, which the market will see as a dovish move and likely to lead to further yen weakness, analysts say. 

Some strategists saw the potential for the yen to weaken to 160 per dollar, while others pointed to the potential for local credit spreads to widen. Many thought the possibility of intervention has increased. 

At the press conference following the BOJ decision, Govenor Kazuo Ueda rhetoric was deemed to have dovish undertones, which saw a further slide in the yen. 

Here’s what analysts and strategists had to say: 

Post-BOJ conference 

Hiromi Ishihara, head of the equity investment department at Amundi Japan

“I think that the overall tone is more dovish than expected, repeating the accommodative policy stance for the time being. I believe that he left the implications of further rate hikes and cut to the JGB purchases to the future, but the timing is likely to be late this year rather than in the first half. Even though Ueda san was very careful in his narrative, he shows his confidence that the rates could be close to neutral rate level in two years time if inflation evolves as expected in the outlook report.

As the market does not expect an immediate rate cut from the Fed, yen is likely to stay weak.

All in all, no surprises, as the equity market focus is moving to earnings results after no surprise from BOJ. But the outlook is positive for financials.”

Krishna Bhimavarapu, APAC Economist at State Street Global Advisors

“The BoJ maintained their policy and hinted at a possibility of hiking this year. Governor Ueda during the press conference mentioned that upside risks to inflation due to weaker yen could be a consideration for monetary policy. He also balanced the view by saying that the weak yen so far has not had a huge impact on trend inflation.  

However, the yen could remain on a weakening path in the near-term and has a high risk of intervention. Still, given the BoJ’s upgrading of core CPI back to 2.8% (from 2.4% in January) in FY 2024, we expect the weaker yen to play a role in lifting inflation, resulting in a rate hike. 

We forecast the policy rate to rise to 0.25% this year, before reaching a terminal of 0.75% in 2025.”

Pre-BOJ conference

Note from Citigroup strategists including Osamu Takashima and Daniel Tobon

“With the USD/JPY rising beyond 156, the market is testing the intervention resolve on the part of the Japanese government. We still believe it will intervene sooner or later, but it has become more difficult to tell at what level the MoF will take action now that the USD/JPY has broken through 155. Our long-term outlook is not changed, but we see an increasing risk that the USD/JPY could ascend beyond 160”

Calvin Yeoh, portfolio manager at Blue Edge Advisors

“This is a ‘nothing-sushi’ — a plain white rice ball. The yen is back to the mercy of ex-Japan rates as Japan government bonds lose any impetus for higher levels.”

Yujiro Goto, chief currency strategist at Nomura Securities

“While prior reports had raised expectations for a discussion of a reduction in JGB purchases, the statement was quite simple, stating that JGB purchases would be implemented in line with the policy decided at the March meeting, with no clear change.”

“The yen is also selling off due to the JGB purchases and the passing of the event. From here on out, all eyes will be on Governor Ueda’s press conference, but now that the BOJ event has passed, the dollar is above 156 yen, and we will be keeping an eye on whether intervention like that seen in September 2022 will take place.”

Akira Moroga, chief market strategist at Aozora Bank

“There were expectations for the removal of the “6 trillion yen per month” figure in the government bond purchase operation. Also, the price outlook was raised, but it wasn’t seen as hawkish enough to raise interest rates in July.”

“The JGB purchase operations were not changed in the statement, but they can be reduced if they want to, so we will have to wait and see the Governor’s press conference and the May purchase schedule, which will be announced at the end of April.”

Charu Chanana, a strategist at Saxo Capital Markets 

“Yet again, the BOJ has proved that it can surprise dovish to even the most dovish expectation on the Street. Markets will likely be reaffirmed in their belief of the carry, and continue to test the limit of yen weakness. USD/JPY could see an accelerated move towards 158-160, with Kanda’s comments of a 10 yen move in a month as a threshold for intervention giving room for further upside.”

“US PCE is on the radar, and we are back to waiting for any intervention to stop the rout in the yen. But any intervention, if not coordinated and without the support of a hawkish policy messaging, will still be futile. Japanese stocks could bring 40,000 back into target as US tech earnings have been broadly supportive and yen weakness has further room to run.”

Takehiko Masuzawa, head of equities trading at Phillip Securities Japan Ltd .

“Some traders who had prepped for potential hawkish BOJ seem to be unwinding their positions, pushing dollar-yen and Japanese stocks higher. That said, stocks won’t keep rising as speculation about intervention increases.”

Hirofumi Suzuki, chief currency strategist at Sumitomo Mitsui Banking Corp.

“Investors are selling the yen as the BOJ’s decision to continue JGB buying in line with its March decision suggest the BOJ doesn’t take action against the yen’s weakness. Should the yen fall further from here, similar to the post-BOJ decision in September 2022, the possibility of intervention will increase. It’s not the level, but it’s the speed that will trigger the action.”

Hidetoshi Ohashi, chief credit strategist at Mizuho Securities Co. 

“Any impact on the credit market would be a widening of Japanese credit spreads due to increased uncertainty over interest rates. Many issuers seem to be planning to sell bonds in May, but supply-demand for 10-year corporate bond spreads has been weak over the past week. If people think that interest rates don’t go up, they would be willing to buy, but if they think the interest rates will rise further, there may be a negative impact for the 10-year zone.”

--With assistance from Ruth Carson, Yumi Teso, Ayai Tomisawa, Daisuke Sakai, Yasutaka Tamura and Iris Ouyang.

(Updates details on press conference in paragraph three, and with quotes from Amundi Japan, State Street and Citigroup)

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