USD/JPY Rises as BOJ Maintains Easy Policy to Weigh on Yen
Inflation remains a key issue for the Bank of Japan (BOJ), as it continues to hover around 3%, higher than the central bank’s target of 2%. This has created speculation that the BOJ will eventually have to tighten its monetary policy. However, the BOJ pushed back against this talk, stating that recent adjustments to its yield curve control (YCC) did not indicate a move towards normalization.
Earlier today, the Bank of Japan published a summary of its opinions, with members reiterating the need to maintain ultra-loose monetary policy. However, some members also noted that inflation and wages were likely to continue rising. This suggests that there is a growing belief within the BOJ that sustainable inflation above 2% may be achievable. If this mindset shift becomes more pronounced, it could significantly impact the exchange rate.
In the United States, the jobs report for July was mixed. While non-farm payrolls remained weak at 187,000, the unemployment rate fell to 3.5% from 3.6%, and wage growth held steady at 4.4%. After the Federal Reserve’s rate hike in July, the focus now turns to what the central bank will do next. Money markets are currently pricing in an 84% chance that the Fed will pause at its September meeting, according to FedWatch. The ultimate decision will depend on various factors, including future inflation and employment reports.
Looking at the technical side of USD/JPY, the upper resistance level stands at 143.55, while the lower support levels are around 141.47 and 140.36.
At 14:59 Beijing time, the US dollar was trading at 142.94/96 against the yen.
The BOJ’s decision to maintain its easy monetary policy has led to a rise in USD/JPY as investors anticipate continued weakness in the yen. However, with hints of a potential shift in the BOJ’s stance on inflation, the exchange rate could experience significant fluctuations moving forward. As both the BOJ and the Federal Reserve weigh their policy options, market participants will closely monitor economic data for further insights into the future direction of USD/JPY.