Japan has had negative interest rates for four years. The overnight call rate set by the Bank of Japan was cut from 0.1% to -0.1% in February 2016. It has not moved since. Japan has had ultra-low rates for more than two decades. The BoJ reduced the overnight call rate to 0.5% in September 1995. It has not been above that level in the subsequent 24 years. If there were one place for 21st-century central bankers to look for the economic efficacy of very low-interest rates it should be Japan. But Japan is rarely mentioned in polite economic society.
USD/JPY retreats from highs amid coroanvirus fears
USD/JPY has fallen from 112 as coronavirus fears trigger safe-haven flows into the yen. Investors are shrugging off disappointing Japanese figures.
Latest USDJPY News
The USD/JPY pair is trading around 112.00, consolidating gains, and with no signs of an imminent bearish corrective move. The 4-hour chart shows that technical indicators hold flat within extreme overbought levels, as 20 SMA turned sharply higher well below the current level, and above the larger ones. April’s monthly high stands at 112.39, the next relevant resistance level. Bulls may continue to buy once above it, pushing the pair toward the 113.00 level.
Support levels: 111.60 111.20 109.80
Resistance levels: 112.40 112.70 113.00
The market kept ignoring the Japanese yen safe-haven condition, selling the currency on the back of dismal data released this month, and an increase in the number of cases of coronavirus in Japan. Fears are that the country is heading into a technical recession, after months of falling industrial production and Q4 GDP contracting.
Falling equities and US Treasury yields barely affected the pair, which retreated to 111.69 during US trading hours only to resume its advance. Japan will publish January National Inflation during the upcoming session, with the core ex-food and energy figure seen steady at 0.9% YoY. The country will also release the All Industry Activity Index for December, and the February Jibun Bank Manufacturing PMI for February, seen at 49 vs 48.8 in the previous month.
THEMES AFFECTING THE USD/JPY
SPECIAL USDJPY YEARLY FORECAST
“Bye bye bye” – N-Sync’s greatest hit from the 1990s can be used to say farewell’s the 21st century’s second decade. The global economy is in-sync once again – but political uncertainty remains elevated and will likely be enhanced in 2020. 2019 was dominated by trade talks as the primary driver for the safe-haven Japanese yen while the Federal Reserve’s shift from raising rates to cutting them weighed on the US dollar. Nevertheless, brighter prospects for the US economy – despite external headwinds – kept the currency pair in check.