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Japanese Yen Falls as BOJ Maintains Status Quo: USD/JPY Eyes 150

The Japanese Yen falls amid the BOJ’s unwavering policy stance. USD/JPY nears the 152.00 high amid persistent inflationary pressures.

  • The Japanese yen weakens as the Bank of Japan (BOJ) maintains ultra-loose monetary policies.
  • The BOJ refrains from policy changes, awaiting stronger evidence of sustained price pressures.
  • Japan’s core inflation exceeds the 2% target, fueling speculation about ending negative interest rates.

Japanese Yen Falls as BOJ Maintains Status Quo USD/JPY Eyes 150

The Japanese yen faced a significant decline against the US dollar following the Bank of Japan’s (BOJ) decision to retain its ultra-loose monetary policies. The BOJ opted to maintain the target at around 0% and a cap of 1.0% for the 10-year bond yield.

As widely anticipated, the Japanese central bank kept its policy settings unchanged during the two-day meeting. Policymakers are awaiting further evidence of sustained price pressures before making any adjustments. All eyes are now on Governor Kazuo Ueda’s briefing for hints about the timing of a potential policy shift. In a recent interview, Ueda suggested that by year-end, the central bank would have sufficient data to evaluate whether to end negative rates, sparking speculation of an early departure from the current policy stance.

With inflation consistently surpassing the central bank’s 2% target, it may only be a matter of time before the BOJ eases its ultra-loose monetary stance. Recent data revealed that Japan’s core inflation rose to 3.1% year-on-year in August, exceeding expectations. Many market participants now believe that the BOJ may phase out its negative interest rates policy next year.

USD/JPY’s Three-Decade High and Technical Analysis

The BOJ’s move in July, which allowed greater flexibility in long-term rates, was seen as a step toward exiting current policy settings. Since then, Japan’s 10-year government bond yield has surged to levels not seen in a decade, aligning with rising yields worldwide as central banks maintain a hawkish stance amidst persistent inflationary pressures.

The divergence in monetary policy between Japan and its counterparts has propelled USD/JPY toward the three-decade high of 152.00 reached in 2022. This level had previously triggered currency market interventions last year, leading to recent verbal interventions by Japanese authorities. While intervention could temporarily curb JPY’s weakness, a sustained JPY strength would require Japan to abandon its ultra-loose monetary policies and/or retreat from hawkishness by other central banks.

From a technical standpoint, while the recent uptrend has slowed, it remains intact. Even on intraday charts, USD/JPY continues to stay above crucial support levels. For instance, on the 240-minute charts, USD/JPY has remained above the 200-period moving average since July. A breach below this moving average, coinciding with the mid-September low of 146.00, would serve as a warning sign of a potential shift in the two-month-long uptrend. A drop below the early-September low of 144.50 could jeopardize the bullish bias.

On the upside, USD/JPY faces a strong resistance level at the 2022 high of 152.00. Beyond 152.00, the next key level to monitor is the 1990 high of 160.35.

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