Yen’s selloff is intensifying and breaking through 155 mark against Dollar as BoJ commences its two-day policy meeting. While no changes in policy are anticipated at this gathering, the continued decline of Yen could provoke hawkish remarks from Governor Kazuo Ueda. He has clearly indicated that a policy adjustment would be considered if weakening Yen’s impact on inflation becomes too significant to overlook.
Attention is also turning towards BoJ’s new economic projections. Inflation forecasts for fiscal years 2024 and 2025 are expected to be upgraded from current predictions of 2.4% and 1.8%, respectively. For fiscal 2026, forecasts could suggest that core inflation will align closely with BoJ’s target of 2%.
Governmental response to Yen’s decline has so far been constrained. Finance Minister Shunichi Suzuki reiterated today that there has been no alteration in the government’s approach towards Yen’s valuation, emphasizing that actions will be taken as appropriate. He added that the government is “carefully monitoring” currency market movements, but declined from further comments.
Technically, strong resistance could be seen from 61.8% projection of 127.20 to 151.89 from 140.25 at 155.20 to limit USD/JPY’s rally on the first attempt. However, firm break of this level will put 100% projection of 140.25 to 150.87 from 146.47 at 157.09 as next near term target.
