Jump to content

Japanese Yen Slips as BoJ Leaves Policy Unchanged but Sees Higher Inflation. Can USD/JPY rally?

Recommended Posts


  • The Bank of Japan keep interest rate targets and asset purchases unchanged
  • The bank anticipates higher inflation in 1 and 2-years but steady for now
  • The Yen weakened on the news. Will USD/JPY make new highs?
Japanese Yen Slips as BoJ Leaves Policy Unchanged but Sees Higher Inflation.  Can USD/JPY rally?


After markets returned from Tokyo lunch break, the lift in inflation expectations from the BOJ appeared to spook markets with G-10 yields rising and developed market equities across Asia moving lower.

The interest rate sensitive tech stocks that make up a significant component of Korean and Taiwanese indices were particularly hard hit.

US equity futures also sank with the Nasdaq leading the way, down over 1%. The S&P 500 and the Dow were lower to a lesser extent.


The Japanese Yen resumed weakening today after the Bank of Japan (BOJ) left monetary policy unchanged. For the market, the focus of the 2-day meeting was on any changes around inflation expectations, and they delivered.

1-year inflation expectations were lifted from 0.9% to 1.1% and 2-years from 1.0% to 1.1%.

Growth forecasts were mixed with current GDP dropped to 2.8% from 3.4%, the 1-year outlook up 3.8% from 2.9% and the 2-year outlook dropped to 1.1% from 1.3%.

With this slowing of near-term growth and the commitment of the BOJ to maintain yield curve control (YCC), the 10-year rate Japanese government bond (JGB) yield has fallen to 0.135%. It made a high of 0.175% last week.

That JGB has not traded above 0.20% since 2016 as the BOJ maintains a policy of keeping the yield within plus or minus 0.25% around zero.

USD/JPY is around 0.2% higher from just before the announcement, while the Nikkei 225 has continued on from a positive to start to now be over 1.1% higher at the time of going to print.

Prior to this week’s meeting, the market had been speculating that the BOJ could hint toward a change in the skew of price risks from the downside to the upside.

This had the market focused on the BOJ’s 1-year inflation forecast and now that it has been lifted, it could pave the way for scaling back stimulus later in the year.

Nevertheless, it should be noted that the new forecast of 1.1% is still below the 2% inflation target.

Headline Tokyo CPI for December year-on-year came out earlier in the month and printed slightly above expectations at 0.8%. Headline national CPI is due out on Thursday and a Bloomberg survey has 0.9% anticipated for the same period.

BOJ Governor Haruhiko Kuroda has reiterated a number of times his willingness to keep rates low despite the Federal Reserve’s intentions to begin lifting them.

The Bank of Japan has made it clear in the past that they would only consider monetary policy tightening when fiscal policy is sufficiently loose and that growth, employment and inflation have warranted it.

With elections coming up in the Japanese summer, it is anticipated that Prime Minister Fumio Kishida will herald a significant stimulus package at some stage.

Energy commodity prices have started 2022 where they left off from last year and have continued moving higher. While a weakening Yen would be welcome by exporters, it would further drive-up power prices for consumers.

This inflationary impact would be a source of annoyance for the BOJ as supply driven price pressures in a low growth environment are problematic for them.

Governor Kuroda will be giving a press a conference at around 0330 GMT.



The USD/JPY moved higher on the Bank of Japan monetary policy announcement.


Chart created in TradingView



Written by Daniel McCarthy, Strategist for DailyFX.com. 18th Jan 2022.

Link to comment

Japanese Yen Forecast: Brief USD/JPY Rebound as BoJ Squashes Recent Speculation

Japanese Yen Price Analysis and News

  • BoJ Alter Inflation Outlook as Expected
  • BoJ Governor Kuroda Recent Speculation, JPY Initially Slips

Japanese Yen Forecast: Brief USD/JPY Rebound as BoJ Squashes Recent  Speculation


Overnight, the main highlight had been the Bank of Japan monetary policy meeting, where officials kept policy unchanged, as widely expected, keeping rates at -0.1% and the 10yr JGB yield target at 0%. Much to many market participants expectations following a series of source reports, the Bank stated that the risks to the price outlook were “roughly balanced” from “skewed to the downside”. However, following the decision, Bank of Japan Governor Kuroda squashed recent speculation, by stating that the BoJ is not considering rate hikes at all or tweaking current monetary easing during his remaining term, which ends in April 2023. The initial response saw the Japanese Yen slip a touch, testing 115.00 amid an unwind of traders front-running the recent BoJ speculation. However, with market participants back on yield watch, with the US 10yr at 1.83%, the subsequent pullback across the equity space has supported the Japanese Yen as the US curve continues to flatten.

Now with the Bank of Japan risk event passing, the focus will be on the Federal Reserve for USD/JPY. Although, with Fed tightening more or less fully priced in, the fresh impetus for USD buying at a time where positioning is crowded may be harder to come by. Therefore, the early YTD high at 116.30 looks to be intact for now, despite elevated US yields. A reminder that USD/JPY would likely pick up when yields are rising and equities remain stable, however, this has not been the case with US tech among the underperformers since the beginning of the year.

Support: 114.23 (55DMA), 113.50 (Jan 14th low)

Resistance: 115.00, 115.50

USD/JPY Chart: Daily Time Frame

Japanese Yen Forecast: Brief USD/JPY Rebound as BoJ Squashes Recent Speculation

Source: Refinitiv


Jan 18, 2022  |  Justin McQueen, Strategist. DailyFX

Link to comment

Create an account or sign in to comment

You need to be a member in order to leave a comment

Create an account

Sign up for a new account in our community. It's easy!

Register a new account

Sign in

Already have an account? Sign in here.

Sign In Now
  • General Statistics

    • Total Topics
    • Total Posts
    • Total Members
    • Most Online
      10/06/21 10:53

    Newest Member
    Joined 28/01/23 23:58
  • Posts

    • Capital, win loss ratio. If you have a trading edge and you can consistently win 50% of your trades, so your winning 5 trades out of 10. So if your risking 1% of your capital per trade, out of your 10 trades 5 would be losers, so that’s 5% loss and realistically out of the 5 winning trades, some would make small profits, some break even and 1, 2 or 3 could run nicely IF you can let your profits run, basically your making money out of 2 trades out of the 10 trades (80/20 Rule Pareto principle) So a $20,000 acct risking 1% is $200 per trade, this will keep the trader with his trade risk based on being able to win 50% of his trades. A long term trend trader can win with 30% wining trade. Basically you need to know your numbers. Rgds Pete
    • Investing in stocks can be a great way to grow your wealth over time. However, there are different approaches that investors can take when choosing which stocks to buy. Two of the most popular approaches are growth investing and value investing. Growth Investing Growth investing is an investment strategy that focuses on buying stocks of companies that are expected to grow at a faster rate than the overall market. These companies are often in industries that are growing quickly, such as technology or healthcare. Investors who use this approach believe that these companies will be able to generate higher profits in the future, which will lead to higher stock prices. One of the main advantages of growth investing is that it can potentially provide higher returns than the overall market. However, it is also riskier than other investment strategies, as these companies often have higher valuations and more volatile stock prices. Value Investing Value investing is an investment strategy that focuses on buying stocks of companies that are undervalued by the market. These companies may be in industries that are out of favour or have recently experienced challenges, but they have strong fundamentals and a history of profitability. Investors who use this approach believe that these companies are undervalued and that their true value will be recognized in the future, leading to higher stock prices. One of the main advantages of value investing is that it can potentially provide lower risk than growth investing. However, it may also provide lower returns in the long run, as these companies may not have the same growth potential as companies in the growth investing category. Comparing Growth and Value Investing Growth and value investing are two different approaches to stock investing, each with its own advantages and disadvantages. Growth investing can potentially provide higher returns but is riskier, while value investing can provide lower risk but potentially lower returns. An investor may choose one approach or a combination of both. A portfolio that contains a mix of growth and value stocks can provide a balance of potential returns and risk. Conclusion Both growth investing and value investing can be effective ways to invest in stocks. The key is to understand the potential risks and rewards of each approach and to choose the one that aligns with your investment goals and risk tolerance. Analyst Peter Mathers TradingLounge™ 
    • I am a beginner, and I must say, there are a lot of rules to the trading game that one must abide by if they want to be successful.   Here, the writer mentions several basic rules for day vs swing trading.  However, I find that often times, the reasoning for these rules is not as  obvious for a beginner as it may be for an expert.   The 'why' factor if I may. For example, why must you have a large capital to trade with as a day trader? Because your positions must be large so that a small change in price will be augmented and turned into a large profit. Also, with such high risk, the margin will be specially high, given the trader is taking up large positions at a time.  Without a large amount of capital, positions may be forced to close due to funds being below margin requirements.  When this happens, you can expect to lose tons of cash, fast.  I learned the hard way. All the best, David Franco      
  • Create New...