- The Japanese weakens across the board after the BoJ announced its policy decision.
- The BoJ keeps the short-term rate target at -0.1% and the 10-year JGB yield target at 0%.
- BoJ makes no change to forward guidance, which, in turn, weighs heavily on the JPY.
The Japanese Yen (JPY) comes under heavy selling pressure during the Asian session on Tuesday and turns lower for the third straight day against the US Dollar (USD) after the Bank of Japan (BoJ) announced its policy decision. As was widely anticipated, the Japanese central bank decided to leave its monetary policy settings unchanged and maintain the 10-year JGB yield target at around 0%, with a 1% upper reference rate. The unanimous decision to keep the Yield Curve Control (YCC) policy unchanged and no change to the forward guidance turn out to be key factors weighing heavily on the JPY.
It, however, remains to be seen if the JPY bears can retain control ahead of the BoJ Governor Kazuo Ueda’s post-meeting press conference. Investors will closely scrutinize comments from Ueda for cues on whether economic conditions are falling into place to exit negative interest rates early next year. Apart from this, geopolitical risks should help limit any meaningful downside for the safe-haven JPY. This, along with subdued USD price action, amid mixed signals about the Federal Reserve’s (Fed) future policy action, should contribute to capping the upside for the USD/JPY pair.
Daily Digest Market Movers: Japanese Yen comes under heavy selling after BoJ’s inaction
- The Bank of Japan decides to keep the short-term interest rate target and the 10-year JGB yield target unchanged at -0.1% and 0%, respectively, which, in turn, weighs heavily on the JPY.
- A slew of influential Federal Reserve officials recently tried to push back against bets for early interest rate cuts, which underpins the US Dollar and pushes the USD/JPY pair higher.
- Chicago Fed President Austan Goolsbee said on Monday that he was confused over the market reaction to last week’s FOMC meeting and that the central bank is not precommiting to cutting interest rates soon and swiftly.
- Adding to this, Cleveland Fed President Loretta Mester said that financial markets had gotten a little bit ahead of the central bank on when to expect interest rate cuts.
- Mester’s comments align with those from two other 2024 voting FOMC members who on Friday stressed that interest rate cuts were not imminent.
- Yemen’s Iran-aligned Houthi militants launched a series of drone and ballistic missile attacks on ships in the southern Red Sea, which it says are a response to Israel’s assault on the Gaza Strip.
- US Defence Secretary Lloyd Austin announced the formation of a multinational coalition and the launch of Operation Prosperity Guardian to patrol the Red Sea and address the Houthi threat.
- Ceasefire came to a very abrupt halt after Israel accused Hamas of not abiding by the deal made between them, in terms of who should be released.
- Israeli strikes have been reported across the Gaza Strip overnight, leading to more Palestinian deaths. Hamas says no talks will be held until Israeli bombardment of Gaza stops.
- The risk of a further escalation of geopolitical tensions in the Middle East drives some haven flows towards the Japanese Yen ahead of the crucial Bank of Japan policy decision.
Technical Analysis: USD/JPY now seems poised to appreciate further towards 144.00 mark
From a technical perspective, a sustained strength beyond the 143.00 mark shift the intraday bias in favour of bullish traders. Hence, a subsequent strength, towards reclaiming the 144.00 mark, looks like a distinct possibility. The latter should act as a key pivotal point, which if cleared decisively will suggest that the recent downtrend witnessed over the past month or so has run its course and shift the near-term bias in favour of bullish traders. Spot prices might then accelerate the positive move towards the 144.75 region en route to the 145.00 psychological mark.
Meanwhile, oscillators on the daily chart are holding deep in the negative territory and suggest that the path of least resistance for the USD/JPY pair is to the downside. This, in turn, warrants some caution before positioning for an extension of the the recent strong recovery move from a multi-month low touched last week. In the meantime, the 142.00 round figure now seems to have emerged as an immediate strong support. A sustained break below will make spot prices vulnerable to accelerate the slides towards the 141.45-141.40 intermediate support before dropping to sub-141.00 levels, or a multi-month low touched last Thursday.
Japanese Yen price today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Euro.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.03% | -0.03% | -0.04% | -0.09% | -0.16% | -0.06% | 0.03% | |
| EUR | -0.03% | -0.06% | -0.07% | -0.12% | -0.19% | -0.09% | 0.01% | |
| GBP | 0.04% | 0.05% | -0.01% | -0.06% | -0.12% | -0.04% | 0.07% | |
| CAD | 0.04% | 0.06% | 0.01% | -0.05% | -0.13% | -0.02% | 0.07% | |
| AUD | 0.09% | 0.12% | 0.06% | 0.05% | -0.07% | 0.03% | 0.12% | |
| JPY | 0.16% | 0.20% | 0.12% | 0.12% | 0.06% | 0.05% | 0.18% | |
| NZD | 0.09% | 0.11% | 0.06% | 0.04% | -0.01% | -0.07% | 0.11% | |
| CHF | -0.02% | -0.02% | -0.04% | -0.06% | -0.10% | -0.19% | -0.09% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
