USD/JPY Steady, BOJ’s Ueda Pledges to Maintain Policy, Markets Eye US Retail Sales

04/14/2023

2 minutes read

2023.04.14 08:00

MarketPulse

At G20 meeting, BoJ Governor Ueda says he’ll maintain policy
US markets brace for soft US retail sales

BoJ’s Ueda says he’ll maintain policy

It has been a light data calendar in Japan this week, leaving Bank of Japan Governor Ueda’s remarks at a G20 meeting in Washington as the highlight of the week. Ueda took over as head of the central bank on Sunday and will chair his first BoJ policy meeting at the end of the month.

Ueda didn’t veer from the script which he has been using since his confirmation hearings earlier this year. He reiterated to maintain the BoJ’s ultra-loose monetary policy, as the central bank expects inflation, which is around 3%, to return back to the 2% target later in the year. There has been speculation that Ueda might tweak policy, such as widening the target band on 10-year government bonds. The BoJ surprised the markets with such a move in December and the yen shot higher as a result.

The G-20 meeting provided Ueda with another opportunity to outline his policy plans and pour cold water on any expectations of a shift in policy. The previous governor, Haruhiko Kuroda, injected massive monetary stimulus in order to boost the weak economy, which has kept the yen at low levels and distorted bond markets. Speculators, who play a cat-and-mouse game with the BoJ, will be on the alert for policy change by Ueda, if not at the April meeting, then perhaps in the coming months.

Markets brace for weak US retail sales

The US releases March later today, with the markets projecting a weak report. Headline retail sales is expected to decline by 0.4% for a second straight month, while the core rate is forecast to fall by 0.3%, after a -0.1% read in February.

Currently, the odds of a 25-bp hike are 69%, with a 31% chance of a pause, according to the CME Group. The retail sales release could affect the direction of the US dollar. A strong release would make a rate hike more likely, which is bullish for the greenback, while a soft release would raise expectations of a Fed pause and weigh on the dollar.

USD/JPY Daily Chart