USD/JPY remains bid as BOJ downgrades Japan's growth forecasts

USD/JPY continues to trade in the green with the Bank of Japan (BOJ) revising growth and inflation forecasts lower and keeping interest rates unchanged as expected. 

The central bank maintained the policy balance rate at -0.1% and retained the 10-year Japanese government bond yield target at about 0%, but downgraded the consumer price index (CPI) inflation forecast for the current fiscal year (April 2020 to March 2021) to -0.6% from -0.5%. 

However, the bank sees inflation rising to 0.4% in the next fiscal year compared to the previous estimate of 0.3%. 

Further, BOJ sees gross domestic product (GDP) contracting by 5.5% in the current fiscal year versus the previous forecast of -4.7% and upgraded growth forecast for the next fiscal to 3.6% from 3.3%. The bank added that it would take additional steps [stimulus] if needed. 

So far, the BOJ's rate decision and economic forecast have not had a notable impact on USD/JPY, possibly because the bank is unlikely to alter stimulus program anytime soon. 

Besides, the focus right now is on the broader market sentiment. At press time, the futures tied to the S&P 500 signify risk reset with a 0.88% and help keep the yen bulls at bay. As such, USD/JPY is flashing green at 104.50. The pair may turn lower if the stocks resume Wednesday's coronavirus-induced sell-off.

Technical levels