Early on Friday, around 03:00 AM GMT, the Bank of Japan (BoJ) will announce the ordinary monetary policy meeting decisions taken after a two-day brainstorming. Following the rate decision, BoJ Governor Kazuo Ueda 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 with the bank of +/-0.50%.
Given the latest increase in the Japanese inflation clues and the hawkish performance of major central banks, today’s BoJ monetary policy meeting announcements become important as market players place heavy bets on the end of ultra-easy measures during 2023.
Although the BoJ isn’t expected to offer any change in its monetary policy, traders will keep their eyes on details of the Yield Curve Control (YCC) policy and Governor Ueda’s speech as the Japanese central bank appears the last unturned stone as far as the monetary policy change is concerned.
Ahead of the event, FXStreet’s Matias Salord said,
Any signs of the Bank of Japan exiting its ultra-loose monetary policy will be positive for the Yen; actually, it would be very positive and could mark the beginning of a medium-term rally for the Yen. USD/JPY reached a seven-month high on Thursday near 141.50, the day after the FOMC meeting and the ECB decision. Later, the pair pulled back all the way to the range that has been prevailing since the beginning of the month.
How could it affect the USD/JPY?
USD/JPY extends the day-start retreat from the yearly high to around 139.90 by the press time as it braces for the BoJ monetary policy decision. In doing so, the Yen pair pays little attention to the recently firmer yields while cheering the US Dollar’s failure to rebound.
Japanese policymakers have already jostled with the expectations of a major move to alter the ultra-easy monetary policy, by suggesting no need for monetary policy change. However, the recent announcements of the US bond issuance due to the debt-ceiling deal are talks of the town supporting the official push for higher rates in late 2023. It should be noted, however, that the BoJ’s play of the Yield Curve Control (YCC) will be crucial to observe during today’s monetary policy releases.
In a case where Ueda manages to pave the way for future rate hikes, either via the alteration of the YCC band or dumping the YCC ultimately, the USD/JPY could extend its latest U-turn from towards the bottom line of a 3.5-month-old rising wedge, around 137.70 at the latest.
Alternatively, an absence of moves and the policymakers’ support the easy money could recall the USD/JPY buyers. However, the rebound will then wait for the US consumer-centric data for clear directions.
Key Notes
USD/JPY eases above 140.00 as traders await BoJ’s YCC move, July expectations
Bank of Japan Preview: No surprises expected, looking at July
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 of the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.