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USDJPY Remains Supported Despite BOJ Mentioning Rate Hikes

USD/JPY still targeting 2023 highs

USDJPY made a steep decline late last year, losing 12 cents. but the bullish reversal this year has been just as strong. Bank of Japan (BOJ) is mentioning rate hikes now, but the Japanese Yen remains pretty weak, with USD/JPY finding support as moving averages during pullbacks.

Both central banks have been responsible for this bullish run in this forex pair, sending the price above 150. The stronger inflation reports from the US last week didn’t help the USD too much, but the JPY didn’t benefit from the decline in the USD in the second part of the week either.

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US Inflation Fail to Change the FED View

The recent data from the United States, such as the Consumer Price Index (CPI) and the Producer Price Index (PPI) report, suggests that inflation is not falling as fast as anticipated, with both the headline and underlying inflation figures surpassing expectations and previous readings. However, despite this inflationary pressure, the latest Consumer Sentiment report indicates that Americans remain optimistic about the economy, even with upward revisions to inflation estimates for 2024.

In response to these developments, FED members have acknowledged that inflation is on a declining trend, but they haven’t pushed back either, and have refrained from committing to a specific time for rate cuts. Instead, they have emphasized the wait-and-see approach before the Federal Reserve starts to lower rates. This cautious approach suggests that policymakers are closely monitoring economic indicators and are not rushing into any decisions regarding monetary policy adjustments, which changes nothing for this pair.

Bank of Japan Not Giving Much Either

Japanese Finance Minister Shunichi Suzuki recently made comments in an interview on Nikkei during which he hinted at the possibility of future interest rate increases but remained ambiguous regarding the timing of such moves. Despite indicating a potential shift in interest rates, Suzuki refrained from saying when these adjustments might occur. This ambiguity suggests a cautious approach, likely reflecting the complexity of economic conditions and the need for careful consideration before implementing any policy changes.

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Skerdian Meta
Lead Analyst
Skerdian Meta Lead Analyst. Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank's local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.
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