USD/JPY Dives and Reverses After BOJ Ueda Comments
The central bank bonanza for the week started with the Bank of Japan early this morning, which held everything as it was, with markets anticipating this. The Bank of Japan rapidly returned to its existing posture, following a hawkish shift in December that did not materialize. So, the JPY returned to 1.48 after dipping to 140 lows in December, and a similar price action took place today, with this pair diving to 147 today after Ueda’s press conference, before reversing higher above 148 again.
USD/JPY H4 Chart – Te 50 SMA Has Turned Into Support
This pair tumbled as the JPY rallied more than 100 pips early based on BOJ Governor Ueda’s press conference. Ueda’s tone was firmer this time as he expressed confidence in meeting the 2% inflation target, setting up the stage for a policy move in spring. USD/JPY dipped below 147 from around 148.00 before recovering back to 148. This kind of price action shows that traders are unlikely to buy into any BOJ comments before they see some action, as they were doing last year.
BOJ Governor, Kazuo Ueda Press Conference
- Japanese economy to gradually pick up moving forward
- Must carefully watch financial, FX market moves and their impact on prices
- Will not hesitate to take additional easing measures if necessary
- Likelihood of achieving 2% inflation target is gradually rising
- Closely watching the outcome of the spring wage negotiations
- Have heard encouraging comments from big firms on wage hikes
- Want to confirm virtuous cycle of wages and prices is in place
- Uncertainty is still high about how widespread wage hikes will be
- But it is not as high as the uncertainty seen last year
- Can’t deny side effects to negative interest rate policy
- Will foresee further rate hikes when exiting negative interest rate policy
The narrative seems to be that the BOJ is “confident” of meeting the 2% inflation target, since the possibility of doing so has “gradually increased.” The JPY is interpreting Ueda’s comments as a suggestion that they will implement a policy change in springl, following the conclusion of the spring salary discussions.
USD/JPY Live Chart
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