- The Japanese weakens across the board after the BoJ announced its policy decision.
- The BoJ keeps the short-term rate target at -0.1% and the 10-year JGB yield target at 0%.
- BoJ makes no change to forward guidance, which, in turn, weighs heavily on the JPY.
The Japanese Yen (JPY) trims a part of its heavy intraday losses, with the USD/JPY pair retreating around 40 pips from a four-day high touched earlier this Tuesday. The JPY, however, remains well offered against the US Dollar (USD) in the wake of the Bank of Japan's (BoJ) decision to maintain the status quo and unanimous vote to keep the Yield Curve Control (YCC) policy unchanged. Furthermore, there was no change to the BoJ's forward guidance, which, along with the prevailing risk-on mood, continues to undermine the safe-haven JPY.
Meanwhile, BoJ Governor Kazuo Ueda, speaking at the post-meeting press conference, reiterated that the central bank will not hesitate to take additional easing measures if necessary. This, along with a modest USD uptick, bolstered by the fact that a slew of Federal Reserve (Fed) officials recently pushed back against market bets for early rate cuts in 2024, remains supportive of the bid tone surrounding the USD/JPY pair for the third straight day. Meanwhile, sustained strength and acceptance above the 143.00 mark favours bullish traders.
Daily Digest Market Movers: Japanese Yen remains heavily offered in the wake of BoJ's inaction
- The Bank of Japan decides to keep the short-term interest rate target and the 10-year JGB yield target unchanged at -0.1% and 0%, respectively, which, in turn, weighs heavily on the JPY.
- Reuters, citing two government sources, reported that the Japanese Finance Ministry is considering bringing forward its plan to reduce 20-year bonds by JPY200 billion from January.
- BoJ Governor Kazuo Ueda said that Japan's economy is gradually picking up and the likelihood is rising that the underlying inflation rate will gradually increase toward target through FY 2025.
- Ueda also reiterated that the central bank won't hesitate to take additional easing measures if necessary and will need to keep scrutinising wage-price virtuous cycle.
- A slew of influential Federal Reserve officials recently tried to push back against bets for early interest rate cuts, which underpins the US Dollar and pushes the USD/JPY pair higher.
- Chicago Fed President Austan Goolsbee said on Monday that he was confused over the market reaction to last week's FOMC meeting and that the central bank is not precommiting to cutting interest rates soon and swiftly.
- Adding to this, Cleveland Fed President Loretta Mester said that financial markets had gotten a little bit ahead of the central bank on when to expect interest rate cuts.
- Mester's comments align with those from two other 2024 voting FOMC members who on Friday stressed that interest rate cuts were not imminent.
- Yemen's Iran-aligned Houthi militants launched a series of drone and ballistic missile attacks on ships in the southern Red Sea, which it says are a response to Israel's assault on the Gaza Strip.
- US Defence Secretary Lloyd Austin announced the formation of a multinational coalition and the launch of Operation Prosperity Guardian to patrol the Red Sea and address the Houthi threat.
- Ceasefire came to a very abrupt halt after Israel accused Hamas of not abiding by the deal made between them, in terms of who should be released.
- Israeli strikes have been reported across the Gaza Strip overnight, leading to more Palestinian deaths. Hamas says no talks will be held until Israeli bombardment of Gaza stops.
- The risk of a further escalation of geopolitical tensions in the Middle East drives some haven flows towards the Japanese Yen ahead of the crucial Bank of Japan policy decision.
Technical Analysis: USD/JPY seems poised to appreciate further, 143.00 holds the key for bulls
From a technical perspective, a sustained strength beyond the 143.00 mark shift the intraday bias in favour of bullish traders. Hence, a subsequent strength, towards reclaiming the 144.00 mark, looks like a distinct possibility. The latter should act as a key pivotal point, which if cleared decisively will suggest that the recent downtrend witnessed over the past month or so has run its course and shift the near-term bias in favour of bullish traders. Spot prices might then accelerate the positive move towards the 144.75 region en route to the 145.00 psychological mark.
Meanwhile, oscillators on the daily chart are holding deep in the negative territory and suggest that the path of least resistance for the USD/JPY pair is to the downside. This, in turn, warrants some caution before positioning for an extension of the the recent strong recovery move from a multi-month low touched last week. In the meantime, the 142.00 round figure now seems to have emerged as an immediate strong support. A sustained break below will make spot prices vulnerable to accelerate the slides towards the 141.45-141.40 intermediate support before dropping to sub-141.00 levels, or a multi-month low touched last Thursday.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.03% | -0.03% | -0.04% | -0.09% | -0.16% | -0.06% | 0.03% | |
| EUR | -0.03% | -0.06% | -0.07% | -0.12% | -0.19% | -0.09% | 0.01% | |
| GBP | 0.04% | 0.05% | -0.01% | -0.06% | -0.12% | -0.04% | 0.07% | |
| CAD | 0.04% | 0.06% | 0.01% | -0.05% | -0.13% | -0.02% | 0.07% | |
| AUD | 0.09% | 0.12% | 0.06% | 0.05% | -0.07% | 0.03% | 0.12% | |
| JPY | 0.16% | 0.20% | 0.12% | 0.12% | 0.06% | 0.05% | 0.18% | |
| NZD | 0.09% | 0.11% | 0.06% | 0.04% | -0.01% | -0.07% | 0.11% | |
| CHF | -0.02% | -0.02% | -0.04% | -0.06% | -0.10% | -0.19% | -0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Bank of Japan FAQs
What is the Bank of Japan?
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
What has been the Bank of Japan’s policy?
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
How do Bank of Japan’s decisions influence the Japanese Yen?
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
Is the Bank of Japan’s ultra-loose policy likely to change soon?
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
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