The Yen (JPY) Expected to Remain Weak With the BOJ Not Intending to Pivot
The Japanese Yen has been extremely weak throughout this year, sending USD/JPY to 152 by mid-November as the Bank of Japan kept rates negative while other major central banks were hiking them at an incredible pace. But since then we have seen some strong bullish momentum in the JPY, which has sent this pair down to 141, although let’s see if it can keep it up in 2024.
The reason for the sudden strength in the JPY in the last month or so, was the comments from the Bank of Japan governor and other members, suggesting that they would tweak the monetary policy soon, with markets implying a December change. But, they didn’t move anything in this month’s meeting and didn’t offer much either.
USD/JPY H4 Chart – The 50 SMA Continues to Keep It Bearish
In simpler terms, the summary of the Bank of Japan’s (BOJ) December meeting doesn’t indicate any immediate change in direction or urgency. The central bank seems to be maintaining its current stance without making any significant shifts in policy. This is a strong bearish factor for the JPY, but we didn’t see much action after today’s release, but most traders are off until next Tuesday, so we’ll have to wait until then,
The BOJ December Meeting Summary
- Patience in Maintaining Monetary Easing:
- One member emphasized the need to patiently maintain monetary easing, suggesting a cautious approach to any changes in the current policy stance.
- Confirmation of Sustainable Achievement of Price Target:
- Another member highlighted the importance of confirming a sustainable and stable achievement of the price target before considering the end of negative interest rates and Yield Curve Control (YCC).
- Scrutiny of Wage and Price Moves Under YCC:
- A member stressed the importance of scrutinizing wage and price movements under YCC, especially given strong upward pressure on prices likely being stabilized.
- Risk Assessment of Wage Hikes:
- One member expressed the view that even if wage hikes next spring are considerably higher than expected, the risk of this causing underlying inflation to significantly exceed 2% is considered small.
- Not Falling Behind the Curve in Raising Rates:
- Another member stated that the current situation does not warrant falling behind the curve in raising rates. This suggests a readiness to act if economic conditions warrant, even if the decision is made after observing wage negotiations in the spring.
More:
- BoJ Member: Steps taken so far have reduced the risk of distortions in the yield curve. The BOJ has flexibility to assess whether the price target can be achieved through a positive cycle of increasing wages and prices.
- BoJ Member: While the risk of inflation rising too quickly and requiring rapid tightening is low, the potential costs if this risk materializes would be significant.
- BoJ Member: The timing for normalizing monetary policy is approaching.
- BoJ Member: The BOJ should seize the opportunity to normalize policy to prevent the risk of high prices negatively impacting consumption and hindering the achievement of the price target.
- BoJ Member: Looking ahead to exiting the current policy, the BOJ must carefully weigh the benefits and costs of Yield Curve Control (YCC) and negative interest rate policies.
- BoJ Member: Attention should be given to consumption trends for now. However, considering the improved economy, the treatment of YCC and risky asset buying should be reviewed later.
- BoJ Member: The BOJ’s forward guidance suggests a willingness to make adjustments to YCC if reaching the price target seems likely with such changes.
- BoJ Member: Continued discussion on issues like the timing of policy exit and the appropriate pace of rate hikes is crucial.
- BoJ Member: From the perspective of maintaining confidence in its ability to conduct policy during the exit phase, the BOJ needs to communicate about central bank balance sheet matters.
- BoJ Member: There’s a growing momentum for wage hikes compared to the previous year.
USD/JPY Live Chart
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