When is the BOJ rate decision and how could it affect USD/JPY?

The Bank of Japan (BOJ) will release its latest monetary policy meeting decision together with the fourth quarter (Q4) Outlook Report approximately at 3:00 GMT on Tuesday. The Japanese central bank is widely expected not to announce any changes in its key policy actions by holding short-term interest rate target at -0.1% and keep directing 10-year Japanese Government Bond (JGB) yields toward zero. Even so, the quarterly economic outlook increases the importance of the event.

Additionally, the BOJ Governor Haruhiko Kuroda speaks at the press conference somewhere near 06:00 GMT and will be closely observed to confirm the Japanese central bank’s future bearish bias.

Ahead of the event, Westpac said,

The Bank of Japan announces the outcome of its meeting today, with a steady hand very much expected on the key policy settings: targeting around 0% on the 10-year JGB yield, -0.1% on banks’ excess reserves and the JPY80trn annual JGB purchase target which is rarely reached due to the priority given to ‘yield curve control.’ This meeting produces quarterly forecasts. The BoJ became a little more dovish in Q4 2019, saying it will, ‘pay close attention to the possibility that the momentum toward achieving the price stability target will be lost.’

TD Securities follows the suit while saying,

We expect no changes from the BOJ. This meeting should pass with little fanfare. This meeting will feature an update to projections but with the major central banks comfortably sidelined, it will hardly matter as the BOJ can remain out of the limelight for some time.

How could it affect the USD/JPY?

Although the BOJ is likely to refrain from any surprises, the recently downbeat data from Japan may be notified in the central bank’s outlook report. Additionally, Governor Haruhiko Kuroda is known for his dovish outlook and recently said that the bank won't hesitate to take additional easing steps if risks grow. With that, the USD/JPY may extend its gradual rise towards the May 2019 top near 110.70.

On the contrary, surprise optimism in the tone of Governor Kuroda might drag the USD/JPY pair below 110.00 for the first time in three days. However, December month high and 10-day SMA could question sellers around 109.85/80 during the fresh declines.

Key Notes

USD/JPY keeps gains above 110.00 ahead of BOJ

USD/JPY Forecast: Bulls waiting for a reason to resume buying

About BoJ Rate Decision

BoJ Interest Rate Decision is announced by the Bank of Japan. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the JPY. Likewise, if the BoJ has a dovish view on the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.