Japanese Yen Steady Ahead Of Fed, BoJ

09/21/2022

1 minute read

2022.09.21 10:50

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MarketPulse

USD/JPY continues to show limited movement this week. In the North American session, is trading at 144.10, up 0.27%.

BoJ Unlikely To Change Policy

The Japanese yen has depreciated by over 20% this year, and the yen’s slide will be high on the agenda at the Bank of Japan’s on Thursday. We could see some strong rhetoric expressing deep concern about the yen, but the central bank has stayed on the sidelines during the yen’s long slide and I don’t expect that to change. The BoJ is committed to its ultra-accommodative policy, in order to boost Japan’s weak economy. Inflation has been rising, but Governor Kuroda has said he won’t tighten policy until it’s clear that is sustainable, which would mean solid wage growth.

There have been some rumblings about currency intervention by Tokyo, and the yen received a short boost in the arm earlier in September, after a report that the BoJ had conducted a rate check, which could have been a prelude to intervention. Japan hasn’t taken such a drastic move since 2011 and would require the consent of the G-20 to do so. As part of its loose policy, the BOJ has been very firm with its yield curve control, and the yen has borne the brunt of this policy, as the US/Japan rate differential continues to widen.

With the poised to raise rates by 75 or even 100 basis points later today, the outlook for the yen appears grim.

The markets are anxiously awaiting the Fed’s rate announcement, as well as the Fed’s quarterly . This will include projections for , , and interest rate levels. If Fed Chair Powell’s message is ‘higher for longer’ with regard to rate levels, investors could respond by sending the higher.