USDJPY Moves Above 144 After the BOJ Meeting

USDJPY hit a new yearly low on Monday, briefly dropping below the critical 140 level. However, the pair rebounded, gaining more than 4 cents after the FOMC 50 bps rate cut, which improved risk sentiment, sending safe havens such as the Yen and the Swiss Franc lower. The expectations for the BOJ were for no rate change, which kept the pressure to the upside for this pair throughout the week.

After a 22-cent decline, the USD/JPY pair started to retrace higher. The initial drop was viewed as a form of “insurance” rate cut, with the Federal Reserve’s dot plot suggesting two more 25 basis point cuts by the end of the year, but fewer cuts than the market had expected for 2025. Initially, the US dollar fell, but it later rebounded as Treasury yields surged following a less dovish tone from Fed Chair Powell. This led the market to scale back expectations for sharp rate cuts in 2025.

USD/JPY Chart Daily – The 20 SMA Is Broken

Despite this, the USD eventually reversed lower again, while USD/JPY continued to push upward, driven by intraday volatility. With swings of around 3.5 cents, the pair exhibited significant volatility as traders reacted to shifting expectations surrounding US monetary policy and interest rate paths. This highlights the uncertain environment in currency markets, especially with the ongoing focus on future interest rate decisions and their implications for the USD/JPY pair.

Bank of Japan Monetary Policy Meeting

Bank of Japan (BoJ) Monetary Policy Meeting – Key Points:

• Current BoJ short-term rate remains at 0.25%.
• Japan’s economy shows moderate recovery, but some weaknesses persist.
• Inflation expectations are rising at a moderate pace.
• Inflation is projected to align with the BoJ’s price target by the second half of the projected period through fiscal 2026.
• Consumption is gradually increasing as a trend.
• The economy is anticipated to grow above potential in the coming years.

Remarks by BOJ governor, Kazuo Ueda

• BoJ Governor Kazuo Ueda highlighted the need to closely watch financial and FX market movements and their effects on Japan’s economy and prices.
• The impact of FX volatility on prices has grown larger compared to the past.
• Uncertainty surrounding Japan’s economy and prices remains high.
• The BoJ will adjust its monetary easing if the economic outlook and price trends demand it.
• Monitoring of economic and market trends will be done with a high sense of urgency.
• The risk of inflation overshoot has lessened, reducing the immediate need for policy tightening.
• Private consumption outlook was upgraded due to rising wages.
• While domestic inflation data may support an improved inflation outlook, global trends introduce additional uncertainties.
• The BoJ hasn’t determined Japan’s neutral interest rate yet.
• Any future policy actions will depend on solid evidence aligning the economy with the expected growth trajectory.

USD/JPY Live Chart