Bank of Japan Policy Meeting Tonight & USD/JPY Forecasts

The central bank which introduced the negative interest rate policy, exactly one year ago, will have its interest rate decision overnight. However, this time the Bank of Japan is broadly expected to keep its interest rates unchanged at -0.10% has been since last January. The 2-day monetary policy meeting is also expected to with its bond-buying program (QQE – Quantitative and Qualitative Easing) at JPY 80 trillion per year in an effort to stimulate inflation rate further and keep the 10-year Japanese government bonds yields near zero, as they are.

In the last policy statement in November, BoJ Governor Haruhiko Kuroda appeared optimistic for the economic growth and the mitigate rate of recovery observed in the global demand, despite the easing bias which continues to exist. The BoJ aims to achieve 2% inflation target, through its QE program. The last three months of the year, the CPI managed to turn positive again, for the first time in seven months, but still well below central bank’s target. The latest figure to see is 0.3% in December. The economic growth of Japan is also moderate, around 1% the two last available quarters, Q2 and Q3, compared to the same time periods the year before.

Even though, if Fed raises rates soon this year, higher global yields may push Bank of Japan to changes as well, and probably increase the annual amount use to buy governments bonds. In general, the central bank is more likely to wait and see the global economic situation under the new U.S. President Donald Trump before takes actions. If BoJ President raises a bit his confidence for the economy, we may see an appreciation of Japanese yen, even with no changes to the monetary policy.


USD/JPY – One of the Best Performing Currencies Last Week
One of the best performing currencies last week was the USD/JPY pair, however, its gains were modest as the price traded lower during today’s trading session. The dollar plummeted more than 2% over this month and is in progress to print the first negative month following three consecutive positive monthly periods.

Over the last two weeks, the pair is developing within a sideways channel with upper boundary the 115.40 resistance barrier and lower boundary the 112.50 support level. This week’s significant events may drive the pair in either direction. As it stands, if the bulls are strong enough to push the pair further up will drive the price towards the 115.40 level which coincides with the 50-SMA on the daily chart. On the other hand, the price struggles to surpass the 100-SMA on the 4-hour chart and is approaching the 50-SMA and the 114.00 strong psychological level. The RSI indicator is sloping to the downside and tries to enter the negative territory. The MACD oscillator is moving lower below its trigger line.