The USD to JPY rate has been surging higher this year and on Wednesday it breached the 155 level, which got traders anxious about a BOJ intervention. However, despite continued verbal intervention from Japanese Finance Minister Sunichi Suzuki regarding monitoring FX markets, Yen’s depreciation persisted.

USD/JPY Chart H4 – Getting Closer to 160

Suzuki’s interventions seem to be losing effectiveness over time, as evidenced by the yen’s weakness against other major currencies, however, markets were also awaiting today’s Tokyo CPI inflation and the meeting from the Bank of Japan. Among major currencies, the Japanese yen remains one of the weakest performers as a result, hitting record low levels ahead of the Bank of Japan (BOJ) announcement.

The BOJ was widely expected to maintain its benchmark interest rate at 0.1%. This decision follows the BOJ’s recent discontinuation of yield curve control and asset purchases, signaling a shift in policy while maintaining a dovish outlook on future rate adjustments. Last night’s CPI data for Tokyo, Japan, indicates a notable decline in inflation, marking the first reading below the target since September 2022.

The April Tokyo CPI Inflation Report

• Tokyo’s April CPI, excluding fresh food, increased by 1.6% year-on-year, falling short of the expected 2.2% rise. The previous reading was +2.4% year-on-year.
• The overall Tokyo CPI for April stood at 1.8%, down from the previous reading of 2.6%.
• Excluding food and energy, the CPI remained at 1.8%, compared to the prior figure of 2.3%.
• Excluding food and energy, the month-on-month change was %, following a +0.2% change in the previous reading.

This outcome may not align with the Bank of Japan’s expectations, as inflation has decreased rapidly. As a result, there wasn’t a compelling reason for the Bank of Japan to adopt a hawkish stance in response to this development. However USD/JPY ignored the report, awaiting the BOJ.

Highlights of the Bank of Japan rate decision on April 26, 2024

• The Bank of Japan decided to leave its interest rate unchanged at the range of 0% to 0.10%.
• The reference from the statement indicating that the BOJ currently purchases about 6 trillion yen of Japanese Government Bonds (JGBs) per month has been removed.
• The decision was made unanimously with a vote of 9-0. This is a change from the previous decision in March, which had a vote of 7-2.
• Risks to the economy are generally balanced, but there are extremely high uncertainties regarding Japan’s economic and price outlook.
• Japan’s economy has recovered moderately, although there are some weaknesses. The output gap is improving and is likely to gradually expand.
• Medium and long-term inflation expectations have moderately heightened.
• Financial conditions have been accommodative, and more firms are starting to pass on rising wages to sales prices.
• The BOJ expects the positive cycle of rising wages and inflation to continue, and vigilance is needed for currency and market movements and their impact on the economy and prices.
• Consumption is expected to gradually increase, and accommodative monetary conditions are expected to continue for the time being.

• Full quarterly statement

USD/JPY Live Chart