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 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 with the bank of +/-0.50%.
As today’s BoJ monetary policy meeting is the last for Governor Haruhilo Kuroda, who fetched the Asian major from the jaws of deflation during a decade-long fight with deflation, the monetary policy announcements are crucial for the USD/JPY traders to watch.
Although the BOJ isn’t expected to offer any change in its monetary policy, the latest hawkish moves of the major central banks and the inflation fear in Japan, as well as receding real wages, highlight today’s BOJ as the key event. Also increasing the importance of the BOJ announcements are the chatters over Governor Haruhiko Kuroda’s last dovish shot and welcome notes of the incoming Governor Kazuo Ueda.
Ahead of the event, FXStreet’s Valeria Bednarik said,
No changes are expected in this March meeting. Market participants anticipate the interest rate will be held at -0.1% while the Yield Curve Control (YCC) will maintain the current cap of 0.5%. A policy shift by Kuroda in his last meeting would be a shocker, and he usually aims to avoid introducing too much noise.
How could it affect the USD/JPY?
USD/JPY remains depressed around 136.00, extending the previous day’s losses amid broad US Dollar weakness and downbeat Treasury bond yields, ahead of the key BoJ announcements.
Japanese policymakers have already jostled with the expectations of a major move to alter the ultra-easy monetary policy. However, the recent announcement of bond-buying and talks of the town supporting the official push for higher rates in late 2023 seem to challenge the USD/JPY buyers. 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 Kuroda 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 the 200-DMA hurdle surrounding 137.50.
Alternatively, an absence of no moves and the policymakers’ support the easy money could recall the USD/JPY buyers. However, the rebound will then wait for the US jobs report for clear directions.
Key Notes
Bank of Japan Preview: Kuroda’s and ultra-loose policy farewell
USD/JPY Price Analysis: Bears are moving in ahead of BoJ
USD/JPY eyes a break below 136.00 as investors digest Fed’s rate hike fears, BoJ policy eyed
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.