Japanese yen soars as BoJ hints at shift in policy

• BoJ hints at monetary policy shift
• Japanese yen soars over 2%
• US releases nonfarm payrolls on Friday

The Japanese yen has surged on Thursday. In the North American session, USD/JPY is trading at 144.00, down a massive 2.25%. Earlier, the yen dropped as low as 143.79 per dollar, which marked the yen’s highest level since August 10.

Will BoJ make a move at the December meeting?

The yen has posted its biggest one-day jump of the year against the dollar on Thursday after Bank of Japan policy makers provided clear hints that the central bank is planning a major shift in monetary policy. Governor Kazuo Ueda said earlier on Thursday that the BoJ would face an “even more challenging” situation at the end of the year and in early 2024 regarding monetary policy guidance and said the BoJ would have to decide which interest rates to target once it ends negative rates.

Ueda’s hint that negative rates might soon end followed comments from BoJ Deputy Governor Ryozo Himino on Wednesday. Himino discussed the potential consequences if the BoJ were to raise rates into positive territory.

The BoJ is generally tight-lipped about its plans, and these comments from senior BoJ officials were unusual. The markets have interpreted the remarks as signals about a potential shift in policy, which has sent the yen soaring on Thursday. The BoJ meets next on December 18-19, and the comments from Ueda and Himino have turned the meeting “live”, as the markets will be watching for a change in policy at the meeting. At previous meetings, tweaks in policy have sent the yen sharply higher and even speculation of a move can send the yen soaring, as evident today.

The US releases nonfarm payrolls, one of the most important economic releases, on Friday. The ADP employment report isn’t considered an accurate indication of job growth but is still closely watched, as it is released just two days prior to the nonfarm payrolls report.

ADP didn’t show much change in November, dropping to 103,000 compared to a downwardly revised 106,000 in October. However, this was well below the consensus estimate of 130,000. Nonfarm payrolls are expected to rise to 180,000, after an October gain of 150,000. If the nonfarm payrolls report misses the estimate, the US dollar will likely lose ground in Friday’s North American session.

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USD/JPY Technical

• USD/JPY has breached support levels at 145.96 and 144.70. The next support level is at 143.69, followed by 142.73
• There is resistance at 148.93 and 150.74

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