Japanese yen pares gains after BOJ meeting

The Japanese yen is slightly lower in the European session on Tuesday. USD/JPY fell 0.54% after today’s BoJ policy meeting but has pared most of those gains and is trading at 147.82, down 0.18%.

Bank of Japan stays pat

As expected, the BoJ maintained its policy settings at today’s meeting. In a unanimous decision, the BoJ board kept interest rates at -0.1% and maintained its yield curve control policy of an upper limit of 1% as a reference for 10-year Japanese government bonds. The BoJ lowered its core inflation forecast for fiscal 2024 to 2.4%, compared to 2.8% in the October forecast.

The BoJ played it safe at today’s meeting, keeping policy intact but lowering the inflation forecast. The BoJ doesn’t appear in a rush to tighten policy, but investors have been bitten before and are aware that the BoJ has a knack for surprising the markets. Governor Ueda has been hinting at a shift in policy, and the Bank’s negative rates seem out of place in a world of higher inflation.

Ueda has insisted that high inflation is due to cost-push factors and that he won’t tighten policy until wage growth increases, as this would provide evidence that inflation is driven by domestic demand and is sustainable at 2%. National wage talks commence in March and if it appears that employee wages will rise, the BoJ could make a major policy announcement in April or in June.

Governor Ueda stated in a follow-up press conference that the probability of reaching the 2% sustainable inflation target is rising and there is evidence of a positive wage-inflation cycle. The BoJ may not have made any changes at today’s meeting, but Ueda’s comments are slight hints that a policy change is only a question of time.

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USD/JPY Technical

  • USD/JPY has pushed through several support levels and is testing support at 146.98
  • There is resistance at 148.44 and 148.76

 

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Kenny Fisher

Kenny Fisher

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