Jump to content

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


Recommended Posts

JAPANESE YEN, BANK OF JAPAN (BOJ), USD/JPY, NIKKEI 225 - TALKING POINTS

  • 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?

UPDATE - 0400 GMT

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.

 

USD/JPY CHART

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

USD/JPY CHART

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

image.png

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
      22,129
    • Total Posts
      93,008
    • Total Members
      42,515
    • Most Online
      7,522
      10/06/21 10:53

    Newest Member
    2267
    Joined 06/06/23 01:09
  • Posts

    • Elliott Wave Analysis TradingLounge Daily Chart, 6 June 23,   Chainlink/U.S.dollar(LINKUSD) LINKUSD Elliott Wave Technical Analysis Function: Follow trend Mode: Motive Structure: Impulse Position: Wave ((3)) Direction Next higher Degrees: Wave V of Motive Details: Wave 3 is usually equal to 1.618 multiplied Length of wave 1 Wave Cancel invalid Level: Chainlink/U.S.dollar(LINKUSD)Trading Strategy: The downtrend continues. From the decline of wave 3, which corresponds to the price being below the MA200 line, showing a clear downward trend, expecting wave 3 to have support at 4.129. Ripple/U.S.dollar(XRPUSD)Technical Indicators: The price is below the MA200 indicating a Down Trend, Wave Oscillator are Bearish momentum. TradingLounge Analyst: Kittiampon Somboonsod, CEWA Source : Tradinglounge.com get trial here!   Elliott Wave Analysis TradingLounge 4H Chart, 6 June 23,   Chainlink/U.S.dollar(LINKUSD) LINKUSD Elliott Wave Technical Analysis Function: Follow trend Mode: Motive Structure: Impulse Position: Wave ((3)) Direction Next higher Degrees: Wave V of Motive Details: Wave 3 is usually equal to 1.618 multiplied Length of wave 1 Wave Cancel invalid Level: 6.675 Chainlink/U.S.dollar(LINKUSD)Trading Strategy: The downtrend continues. From the decline of wave 3, which corresponds to the price being below the MA200 line, showing a clear downward trend, expecting wave 3 to have support at 4.961. Chainlink/U.S.dollar(LINKUSD)Technical Indicators: The price is below the MA200 indicating a Down Trend, Wave Oscillator are Bearish momentum.
    • Bitcoin BTC/USD Summary The 61.8% retracement level is around the 24,000, that said the 25,000 is the larger price point (Medium Level) and we can expect the price to swing above and below this level and could take about 4 or 5 days to bottom into Wave ii) low Elliott Wave 4) of iii of (c) of ii) Strategies: Once Wave (c) of ii) is completed, we simply need to wait and observe the first impulse wave upwards as part of the next long trade setup using the abc at a level as the trade setup. Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge com  Access trial at tradinglounge    
    • Tech Stock Market Report: Apple (AAPL),Tesla (TSLA), Amazon (AMZN), Nvidia (NVDA), Microsoft MSFT, Meta Platforms, Netflix (NFLX), Alphabet GOOGL  Stock Market Summary: Tech stocks remain in bullish trend.  Elliott Wave Analysis: APPL is in Wave (a) of an (a) (b) (c) Wave iv) correction, this will affect ETFs and the Nasdaq 100. This correction should be completed at the end of the next trading session. The tech stocks in this video are fine in their bullish trend structures. Trading Strategy: Longer term traders can simply hold as the main trend structure as a bullish trend is in place. Video Chapters 00:00 Apple (AAPL) 09:35 Amazon (AMZN) 10:54 NVIDIA (NVDA) 15:44 Meta Platforms (META) 17:41 Netflix (NFLX)  19:20 Alphabet (GOOGL) 21:33 Microsoft (MSFT) 25:16 Tesla (TSLA) 31:35 End Analyst Peter Mathers TradingLounge™ Australian Financial Services Licence - AFSL 317817 Source: tradinglounge com   
×
×
  • Create New...