The Japanese Yen (JPY) is little changed as markets digest the announcement of a snap election in Japan, keeping near-term FX moves contained. With rate markets still pricing BoJ tightening and a policy meeting ahead, the central bank’s tone will be key for the yen’s next move, Scotiabank's Chief FX Strategists Shaun Osborne and Eric Theoret report.

BoJ expectations support Yen

"The yen is steady, entering Monday’s NA session with a fractional 0.1% gain as market participants assess the implications of a snap election called for February 8."

"PM Takaichi has been looking to strengthen her mandate on the back of improved popularity, with proposals that generally lean toward looser fiscal policy. The BoJ’s response will be critical, given PM Takaichi’s expressed preference for cooperation and softened central bank independence."

"BoJ rate expectations remain biased toward tightening with at least one 25bpt hike by July and nearly 50bpts priced in by the end of December. We will be closely watching for any shift in the BoJ’s tone at this Friday’s policy meeting."