The Bank of Japan maintained its present monetary policy stance, as was widely anticipated. Nonetheless, the market's current emphasis is on a more sanguine projection for wages and inflation. Based on analysts' evaluation, the likelihood of the initial interest rate hike in June is marginally greater than that of April.
BoJ Policy Review
The BoJ's decision to maintain its policy rate and 10-year yield target was not unexpected. The gradual change in the bank's position regarding inflation implies that a policy normalization is imminent. In contrast to his previous meetings, Governor Kazuo Ueda expressed a more optimistic stance regarding wages and inflation during this one, suggesting the possibility of a shift towards policy normalization.
In addition to scrutinizing the policy decision, market participants paid close attention to the quarterly outlook report released by the BoJ. The BoJ, as anticipated, decreased its core inflation forecast for FY2024 from 2.8% to 2.4%.
JPY Bulls Await Inflation Report
Initial 2024 prices are anticipated to be influenced by recent fluctuations in global commodity prices and the government's endeavors to rein in inflation. Nonetheless, the BoJ anticipates sustained wage growth to sustain underlying inflationary pressures through FY2025. This implies an inexorable increase in interest rates; however, the precise moment remains ambiguous due to the Bank of Japan's reaffirmation of a cautious easing approach.
Although the nationwide CPI report for April is essential for analyzing inflation trends, it will not be accessible in time for the April meeting. Additionally, the decision may be influenced by the ongoing compensation negotiations during the Shunto season in April.
As market anticipations transition to the April 26 meeting, the current price movement suggests a readiness to postpone the normalization of BoJ policy until April. USD/JPY could remain in the 147/148 region for the next month due to potential upside risks to US interest rates; BoJ intervention is imminent if the pair surpasses 150.
USDJPY Technical Analysis
In the daily chart of USDJPY price, the current price trades sideways above the dynamic 20-day EMA, while the long-term bullish trend remains intact.
An increased volatility is visible above the 50% Fibonacci Retracement level from 151.94 high to 140.24 area, suggesting a struggle for bulls. However, no sign of a bearish reversal is visible as the dynamic levels are still working as support.
Based on this outlook, a bullish rebound from the current level could extend towards the 150.00 level. A minor downside correction and another rebound from 147.00 to 146.09 is possible, but a daily candle below the 146.00 level could increase the downside possibility.
