USD/JPY: Waiting on the BOJ to do something meaningful

  • Japanese Officials jawboning unable to upend dollar rally overnight
  • US 10-year real yields approaches 15-year high
  • Fed rate hike odds back over 50% for a hike by year end

Over the weekend, Congress opted to kick the can down the road, passing a short-term stopgap funding bill.  This measure means the government will remain open until November 17th, providing natural disaster aid but not additional funding for Ukraine or border security. With a temporary funding solution in place, Wall Street quickly returned to fueling the bond market selloff, which helped send the dollar higher across all its major trading partners. 

US stocks are declining as the Treasury yields soar and after the king of electric vehicles posted disappointing Q3 deliveries and production results.   Investors are starting to realize the yield available across the Treasury curve is just too attractive right now. 

Investors were focused on Fed Chair Powell’s appearance, but that turned out to be a nonevent. What was more impactful was Fed’s Bowman hawkish comments. She noted “I continue to expect that further rate increases will likely be needed to return inflation to 2% in a timely way.” The harsh reality for perma-bulls is that given the expectations for Q3 and early Q4 economic data, the Fed is probably not yet done raising rates.

Tesla’s results are very disappointing because last quarter was still supposed to reflect a strong consumer.  Since the average Tesla owner is an upper middle class person, the Q3 miss speaks volumes of how much weaker the consumer has become.  The consumer outlook for Q4 is turning bleak now that excess savings have gone, student loan payments are back, financing costs are getting more painful, and the labor market is showing signs of weakness. 


Japanese officials continue to try to jawbone the FX market.  It seems the dollar can’t be stopped and many intervention threats are getting shrugged off. Last night, Japan made multiple attempts to provide support for the Japanese yen: The BOJ summary of opinions highlighted preparation for an eventual exit from their ultra-loose policy, outlining that they could have clarity around January-March on sustained 2% inflation.  Japan Finance Minister Suzuki reiterated on Monday that he was watching currency moves “cautiously”. Japan’s Chief Cabinet Secretary Matsuno stated the government is watching FX moves with ‘a high sense of urgency’.  The BOJ also announced additional JGB buying later this week, adding 5-10 year JGBs to the fixed amount of operations. 

If the US government shutdown happened, Japan might have had the perfect scenario to intervene in the FX market. A delay in NFP data and possibly CPI, would have undoubtedly forced the Fed to keep rates on hold at the November 1st meeting.  Selling dollars and buying yen during thin conditions during China’s golden week could have given Japanese officials a bigger bang with a currency intervention.  Yen weakness will remain until we see significant action from the BOJ; including defending yield curve control or signaling a change in monetary policy is likely.  

USD/JPY Daily Chart:

Now the FX market is wondering will US economic data help continue to drive the US growth exceptionalism story or not.  The yen will likely test 150 waters, but actual intervention might have to wait until Japan is confident that the dollar’s fundamentals aren’t too strong to make this a futile attempt.  The 155 level is going to be the next major resistance that everyone has their eyes on. 

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Ed Moya

Ed Moya

Contributing Author at OANDA
With more than 20 years’ trading experience, Ed Moya was a Senior Market Analyst with OANDA for the Americas from November 2018 to November 2023. His particular expertise lies across a wide range of asset classes including FX, commodities, fixed income, stocks and cryptocurrencies. Over the course of his career, Ed has worked with some of the leading forex brokerages, research teams and news departments on Wall Street including Global Forex Trading, FX Solutions and Trading Advantage. Prior to OANDA he worked with, where he provided market analysis on economic data and corporate news. Based in New York, Ed is a regular guest on several major financial television networks including CNBC, Bloomberg TV, Yahoo! Finance Live, Fox Business, cheddar news, and CoinDesk TV. His views are trusted by the world’s most respected global newswires including Reuters, Bloomberg and the Associated Press, and he is regularly quoted in leading publications such as MSN, MarketWatch, Forbes, Seeking Alpha, The New York Times and The Wall Street Journal. Ed holds a BA in Economics from Rutgers University.