2023-08-08 07:00:00
USD/JPY rises as BOJ maintains easy policy to weigh on yen
Inflation remains a key issue for the BOJ, although it is far below other major economies at around 3%. Still, inflation remains above the central bank’s 2 percent target, continuing to fuel speculation that the BOJ will have to tighten policy sooner or later. The BOJ pushed back on talk of tightening monetary policy, and when the central bank recently increased the flexibility of its yield curve control (YCC), Governor Kazuo Ueda was careful to stress that the move did not represent a move toward normalization.
Against this backdrop, the Bank of Japan published a summary of its opinions earlier today. Members reiterated the need to maintain ultra-loose monetary policy, but some noted that inflation and wages were likely to continue to rise. One view even states that 2% inflation “seems clear in a sustainable and stable manner” and urges the BOJ to make the YCC more flexible.
The BOJ’s internal talk could be a signal that policymakers are slowly acknowledging that inflation, which has been running above the 2% target for months, may be sustainable. This would mark a sea change in the BOJ’s thinking and could have a major impact on the exchange rate.
In the US, the US jobs report for July was mixed. Non-farm payrolls remained weak at 187,000. Job growth slowed, but the unemployment rate fell to 3.5% from 3.6% and wage growth held steady at 4.4%.
After the Fed hiked rates in July, what’s next? Money markets are pricing in an 84% chance the Fed will pause at its September meeting, according to FedWatch. It is entirely possible that the Fed will end its tightening policy, but much will depend on the data, especially the inflation and employment reports.
On the technical side of USDJPY, the upper resistance level of USDJPY is at 143.55, and the lower support levels are around 141.47 and 140.36.
At 14:59 Beijing time, the dollar was trading at 142.94/96 against the yen.
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