Japanese yen edges lower after hawkish BoJ minutes

  • USD/JPY on doorstep of 150 line
  • BoJ says it will buy more JGBs
  • BoJ’s minutes indicate 2% sustainable inflation may be close

The Japanese yen has started the week with slight losses. In the European session, USD/JPY is trading at 149.80, up 0.29%.

BoJ says it will buy more JGBs

The Bank of Japan said on Monday that it will conduct an unscheduled purchase of Japanese government bonds(JGBs) on Wednesday. This was in response to the rise in JGB yields, which have climbed to 0.775%, their highest level since September 2013. The BoJ is looking to slow the rise in yields, which are nearing the BoJ’s cap of 1%, and defend its yield curve control policy.

The BoJ minutes were released earlier today, and a comment that the “achievement of 2% inflation in a sustainable and stable manner seems to have clearly come in sight” caught the attention of the markets. Does this mark a shift in the stance of the BoJ? The hawkish remark has raised expectations that the BoJ may be preparing to exit negative rates, which would be a sea change in the central bank’s monetary policy.

The Japanese yen remains under pressure and is trading very close to the 150 level, which has held since October 2022. The 150 line could be a red line for the Ministry of Finance, which intervened last year when the yen fell close to 152. Finance Minister Suzuki has warned that he is carefully monitoring the exchange rate and that the ministry reserves the option to respond to “excessive volatility”.

Last year’s currency interventions pushed up the yen’s value but only for a very short time. The yen’s biggest problem is US/Japan rate differentials, which have widened as US Treasuries are moving higher while JGBs have been capped at 1%. It’s doubtful that another intervention would have a longer-lasting effect on the yen, but that doesn’t mean the Ministry of Finance would resort to intervention, if only to stabilize the yen and force speculators out of the market.

.

USD/JPY Technical

  • USD/JPY is testing resistance at 149.97. Above, there is support at 151.23
  • There is support at 149.10 and 148.50

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including Investing.com, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.