Early on Tuesday, around 03:00 AM GMT, the Bank of Japan (BOJ) will provide the decision of its routine monetary policy meeting. Following the rate decision, BOJ Governor Haruhiko Kuroda will attend the press conference, around 06:00 AM GMT, to convey the logic behind the latest policy moves.
The Japanese central bank is widely expected to keep the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero.
Although the BOJ isn’t expected to offer any change in its monetary policy, the quarterly economic forecasts will be important to watch following the fresh talks of the virus-led threats to inflation, as signaled in the latest Summary of the BOJ Monetary policy meeting.
Ahead of the event, Westpac said,
Basic policy settings are expected to be unchanged, notably the ‘around zero percent’ yield target for the 10-year bond. But quarterly forecasts will be noted, with suggestions that inflation forecasts will be nudged a little closer to the 2% target and the longstanding bias of downside risks to inflation removed.
Additionally, FXStreet’s Dhwani Mehta said,
Despite the upbeat economic outlook for the next fiscal year, the BOJ could refrain from deciding on continuing the current easing measures, as the Omicron covid wave is brewing trouble once again in Japan.
How could it affect the USD/JPY?
USD/JPY remains pressured around 114.45, down 0.12% intraday, ahead of the BOJ event. The yen pair reacts to the soft USD despite firmer yields amid mixed concerns over Fed’s rate hike and Omicron.
While portraying the market moves, the US 10-year and 5-year Treasury yields rose to the highest in two years while 2-year coupon jump to the February 2020 levels during the week-start move. On the other hand, S&P 500 Futures rise 0.12% intraday by the press time.
Given the wide division between the policymakers of the US Federal Reserve (Fed) and the BOJ, the carry trade opportunities may escalate should the BOJ choose to keep the easy money flowing by citing the virus-led economic hardships. However, the covid-linked challenges to inflation may weigh on the carry trade and weigh on the USD/JPY prices.
Technically, failures to cross October 2021 peak and previous support line from late September, surrounding 114.70, join the bearish MACD signals to direct USD/JPY prices towards the latest swing low near 113.50.
Key Notes
USD/JPY snaps two-day uptrend around 114.50 despite firmer yields, BOJ eyed
BOJ Preview: Raising its view on inflation, finally!
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
EUR/USD edges lower toward 1.0700 post-US PCE
EUR/USD stays under modest bearish pressure but manages to hold above 1.0700 in the American session on Friday. The US Dollar (USD) gathers strength against its rivals after the stronger-than-forecast PCE inflation data, not allowing the pair to gain traction.
GBP/USD retreats to 1.2500 on renewed USD strength
GBP/USD lost its traction and turned negative on the day near 1.2500. Following the stronger-than-expected PCE inflation readings from the US, the USD stays resilient and makes it difficult for the pair to gather recovery momentum.
Gold struggles to hold above $2,350 following US inflation
Gold turned south and declined toward $2,340, erasing a large portion of its daily gains, as the USD benefited from PCE inflation data. The benchmark 10-year US yield, however, stays in negative territory and helps XAU/USD limit its losses.
Bitcoin Weekly Forecast: BTC’s next breakout could propel it to $80,000 Premium
Bitcoin’s recent price consolidation could be nearing its end as technical indicators and on-chain metrics suggest a potential upward breakout. However, this move would not be straightforward and could punish impatient investors.
Week ahead – Hawkish risk as Fed and NFP on tap, Eurozone data eyed too
Fed meets on Wednesday as US inflation stays elevated. Will Friday’s jobs report bring relief or more angst for the markets? Eurozone flash GDP and CPI numbers in focus for the Euro.