USD/JPY used to be on a really strong bullish trend throughout this year and pushed up to 152 by the end of October. But it reversed back then after intervention by the Finance Ministry of Japan and the Bank of Japan (BOJ) and the decline has been just as fast. Early last week the JPY surged another 7 cents higher after the BOJ widened the tolerance band within which the 10-year JGB would be allowed to fluctuate, to +/-0.5% from +/- 0.25% previously. It’s not a major change but it was unexpected, so USD/JPY crashed around 700 pips lower that day.

Although it has been crawling up for more than a week now and buyers and moving averages are acting as support on the H1 chart. The BOJ chairman Kuroda is insisting that they are not tightening the monetary policy, which is bearish for the JPY and bullish for USD/JPY .

Kuroda’s key remarks once again reiterated his view that ultra-easy monetary policy would be sustained, saying that the widening of the tolerance band in the 10-year JGB was aimed at improving market function.

• “This is definitely not a step towards an exit”
• the BOJ will maintain “utmost support” for the economy by keeping accommodative financial conditions in place.
• “The bank will aim to achieve the price stability target in a sustainable and stable manner, accompanied by wage increases, by continuing with monetary easing under the framework of yield curve control.”

Kuroda did flag that he expected conditions to come into place for sustained, stable inflation.

• “Labour market conditions in Japan are projected to tighten further and firms’ price- and wage-setting behaviour is also likely to change.”
• “We are approaching a critical juncture in breaking out of the prolonged period of low inflation and low growth since the collapse of the bubble economy.”

Kuroda did not guide as when he expected this. He did, however, once again say that over the course of the new fiscal year, which begins in April 2023, Japan’s core consumer inflation is likely going to cool off and average at less than 2%.

This week’s data from Japan

• The Services PPI YoY for November was 1.7% as expected 1.7%, down from 1.8% in October
• Unemployment Rate for November down to 2.5% from 2.6% previously
• Retail Sales YoY down to 2.6% from 4.4% previously
• Housing Starts YoY came at -1.3% in November from
• BOJ Core CPI YoY up to 2.9% from 2.7% in October

USD/JPY Live Chart