BOJ In Focus this Week

Bank of Japan watchers and JPY traders are gearing up for the first BOJ rates meeting since new BOC chief Ueda ordered a review of monetary policy. The move taken at the last meeting was seen by many as potentially paving the way for a shift away from the ultra-loose monetary policy the bank has operated for over a decade.  Ueda has commented previously on the need for the bank to consider how to adapt away from this policy once inflation calls for such a shift and has suggested that ahead of that time, the yield curve control program can be altered as necessary.

Market Implications for JPY

With surprise rate hikes from the RBA and BOC recently and with the ECB pegged to hike rates further this week there has been speculation that perhaps the BOJ might look to move on rates. However, comments today from BOJ Wakatabe seemed to push back against this idea. Wakatabe told reporters during an interview today that it is still too early to call the move higher in CPI sustainable. Furthermore, Wakatabe added that he felt there was an overwhelming case for continuing current policy with this meeting likely to see the bank holding policy unchanged. In this scenario, JPY is likely to weaken further as traders focus on hawkish central bank policies elsewhere.

Technical Views

USDJPY

The rally in USDJPY has fizzled out recently with price settling into a corrective zone of consolidation above the 138.03 level. While this level holds as support, however, the pair should retain an upward bias with a break of 142.21 the preferred view, targeting 145 thereafter.