Bank of Japan Maintains Status Quo, Downgrades Inflation Forecast, Euro Rebounds Amid Dollar Weakness (2024)

In its first meeting of the year, the Bank of Japan (BOJ) predictably maintained its ultra-loose monetary policy. The BOJ unanimously agreed to hold interest rates at -0.1% and continued to adhere to its yield curve control policy. This policy caps the 10-year Japanese government bond yield at an upper limit of 1%, according to a policy statement released after a two-day meeting.

Market Reactions and Predictions

Following the announcement, yields on the 10-year JGBs saw a slight decrease, while the Japanese yen strengthened by 0.1% against the dollar. The Nikkei 225 equity benchmark momentarily reached a new 33-year high before gains were reduced.

The market consensus currently anticipates that the BOJ will terminate its negative rate regime by April, provided that annual spring wage negotiations indicate a significant increase in wages.

The USD/JPY pair saw some buying activity following the BOJ’s policy announcements, trading at 148.37, an increase of 0.22% on the day.

USDJPY Daily Chart

Bank of Japan Maintains Status Quo, Downgrades Inflation Forecast, Euro Rebounds Amid Dollar Weakness (1)

Inflation Forecasts Revised

The BOJ cut its core inflation forecast for the upcoming fiscal year. The board members adjusted their median growth forecast for core consumer prices (excluding food prices) down to 2.4% for fiscal 2024, which starts in April. This is a decrease from the 2.8% estimated in October. Additionally, the central bank slightly raised the core CPI inflation estimate for fiscal 2025 to 1.8% from the previous forecast of 1.7%.

Economic Projections and Statements

The BOJ believes that wage increases could stimulate consumer spending, leading to more sustainable and steady inflation driven by domestic demand. Despite a slowdown in Japan’s core CPI to 2.3% in December, it has remained above the BOJ’s 2% target for 21 consecutive months.

The BOJ released several statements indicating a balanced economic activity risk, a need to monitor the relationship between wages and prices, and a commitment to continue monetary easing as needed. The bank also reiterated its intention to take additional easing steps if necessary.

USD/JPY Experiences Intraday Rebound

USD/JPY Regains Ground

The US Dollar (USD) against the Japanese Yen (JPY) has managed to regain some ground following recent losses, according to recent data. The currency pair has staged a corrective rebound from its 5-month low of 140.25, which was recorded on December 28, 2023.

Technical Outlook

The technical outlook suggests that the USD/JPY’s rebound could extend through 146.40, although the upside is expected to be limited by a 61.8% retracement. The Relative Strength Index (RSI), a key technical indicator, has moved above 30, indicating a potential continuation of the upward momentum.

Market Speculation

Despite the rebound, the USD/JPY pair remains under pressure, down over six percent from November’s peak.

Intraday Trading Recommendation

For intraday traders, the current market conditions suggest a BUY recommendation for the USD/JPY. The entry price (pivot) is set at 147.60, with target and take profit levels (TP) at 148.55 and 148.80 respectively. Traders should be prepared to risk 2% per trade.

Bank of Japan Maintains Status Quo, Downgrades Inflation Forecast, Euro Rebounds Amid Dollar Weakness (2)

Please note, these recommendations are subject to change due to market volatility.

Euro Rebounds Amid US Dollar Weakness

The Euro (EUR) has made a noticeable recovery against the US Dollar (USD), moving above the 1.0900 mark in the early hours of European trading on Tuesday. The currency pair’s rebound comes after marginal losses posted on Monday and is largely attributed to a renewed weakness in the USD.

Impact of USD/JPY Decline

A sharp decline in the USD/Japanese Yen (JPY) exchange rate has contributed to the weakening of the USD and subsequently aided the EUR/USD’s upward movement. This decline was triggered by relatively hawkish comments from Bank of Japan (BoJ) Governor Kazuo Ueda, following the BoJ’s decision to maintain its current policy settings.

Limited Bullish Momentum for EUR/USD

Despite the weakened USD helping to propel the EUR/USD upwards, the pair may struggle to breach the 1.0930-1.0935 resistance area unless there is a significant improvement in risk sentiment later in the day. The bearish pressure on the EUR/JPY, which also resulted from capital outflows from the USD, has limited the potential for further bullish momentum in the EUR/USD.

Upcoming Consumer Confidence Data

Later today, the European Commission will release preliminary Consumer Confidence data for January. However, this is not expected to have a notable impact on the Euro’s valuation.

Intraday Trading Recommendation

For intraday traders, the current market conditions suggest a BUY recommendation for the EUR/USD. The entry price (pivot) is set at 1.0875, with target and take profit levels (TP) at 1.0910 and 1.0925 respectively. Traders should be prepared to risk 2% per trade.

Bank of Japan Maintains Status Quo, Downgrades Inflation Forecast, Euro Rebounds Amid Dollar Weakness (3)

Please note, these recommendations are subject to change due to market volatility.

GBP/USD Ascends for Second Consecutive Session

Positive Trajectory for GBP/USD

The British Pound (GBP) against the US Dollar (USD) has continued its upward trajectory for the second successive session this Tuesday, nudging close to the 1.2740 mark. The Pound Sterling’s strong performance is bolstered by expectations of a status quo in the Bank of England’s (BoE) monetary policy.

Bullish Momentum Building

Early Tuesday saw the GBP/USD gaining traction and moving towards the 1.2750 level. This comes after Monday’s trading session ended virtually unchanged. The near-term technical outlook suggests that bullish momentum is accumulating.

Market Mood Boosts GBP/USD

An optimistic market sentiment has hampered the US Dollar’s ability to gather strength, aiding the GBP/USD’s upward push. A Bloomberg report stating that China is considering a rescue package for the equity market worth around 27 billion USD sparked a rally in Asian equity indexes. Hong Kong’s Hang Seng index, for instance, saw nearly a 3% gain.

Intraday Trading Recommendation

For intraday traders, the current market conditions suggest a BUY recommendation for the GBP/USD. The entry price (pivot) is set at 1.2695, with target and take profit levels (TP) at 1.2745 and 1.2760 respectively. Traders should be prepared to risk 2% per trade.

Bank of Japan Maintains Status Quo, Downgrades Inflation Forecast, Euro Rebounds Amid Dollar Weakness (4)

Please note, these recommendations are subject to change due to market volatility.

Australian Dollar Edges Higher Amid Positive Business Confidence

Aussie Dollar Sees Improvement

The Australian Dollar (AUD) has seen a slight increase on Tuesday, recovering from losses experienced in the previous session. This improvement is potentially due to increased confidence in businesses as reported by the National Australia Bank. Additionally, the AUD has likely been supported by an upturn in the performance of Australia’s share market.

However, the US Dollar (USD) continues to strengthen despite lower US Treasury yields, which could put some pressure on the AUD/USD pair.

Potential Early Interest Rate Cuts

The Australian currency faces challenges due to speculation about potential early interest rate cuts from the Reserve Bank of Australia (RBA). This speculation is fueled by recent indicators such as low Aussie Consumer Confidence and Employment Change figures, leading to concerns about the economic outlook.

Intraday Trading Recommendation

For intraday traders, the current market conditions suggest a BUY recommendation for the AUD/USD. The entry price (pivot) is set at 0.6565, with target and take profit levels (TP) at 0.6615 and 0.6630 respectively. Traders should be prepared to risk 2% per trade.

Bank of Japan Maintains Status Quo, Downgrades Inflation Forecast, Euro Rebounds Amid Dollar Weakness (5)

Please note, these recommendations are subject to change due to market volatility.

Crude Oil (WTI) Intraday: Positive Momentum Expected

Crude Oil’s Market Performance

Crude Oil (WTI) is showing signs of a positive momentum in the intraday trading session. After experiencing a period of volatility, the commodity seems to be finding support around the 74.30 level.

Intraday Trading Recommendation

Given the current market scenario, there is a BUY recommendation for Crude Oil (WTI). The entry price or pivot point is set at 74.30. The target and take profit levels (TP) are projected at 75.30 and 75.80 respectively. Traders should be prepared to risk 1% per trade in this intraday trading scenario.

Market Indicators

The Relative Strength Index (RSI), a key momentum indicator, has just landed on its neutrality area at 50% and is turning upwards. This indicates a potential uptick in buying pressure, which could drive prices higher in the near term.

Bank of Japan Maintains Status Quo, Downgrades Inflation Forecast, Euro Rebounds Amid Dollar Weakness (6)

Please note, these recommendations are subject to change due to market volatility.

Disclaimer:

All information has been prepared by TraderFactor or partners. The information does not contain a record of TraderFactor or partner’s prices or an offer of or solicitation for a transaction in any financial instrument. No representation or warranty is given as to the accuracy or completeness of this information. Any material provided does not have regard to the specific investment objective and financial situation of any person who may read it. Past performance is not a reliable indicator of future performance.

Phyllis Wangui

Phyllis Wangui is a Financial Analyst and News Editor with qualifications in accounting and economics. She has over 20 years of banking and accounting experience, during which she has gained extensive knowledge of the forex, stock news, stock market, forex analysis, cryptos and foreign exchange industries. Phyllis is an avid commentator on these topics and loves to share her insights with others through financial publications and social media platforms.

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Bank of Japan Maintains Status Quo, Downgrades Inflation Forecast, Euro Rebounds Amid Dollar Weakness (2024)

FAQs

What is the rate decision of the Bank of Japan? ›

The Bank of Japan's lending rate for overnight borrowing by banks was raised to a range of 0 to 0.1% from minus 0.1% at a policy meeting that confirmed expectations of a shift away from ultra-lax monetary policy. It was the first rate hike since February 2007.

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Why does Bank of Japan have negative interest rates? ›

Negative interest rates are used by central banks to stimulate economic growth and combat deflation. In Japan, negative interest rates were an “extraordinary form of large-scale monetary easing that has continued for many years,” said Seisaku Kameda, the Executive Economist at the Sompo Institute Plus.

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What was the result of the BOJ meeting? ›

BOJ raised its short-term interest rates to 0% to 0.1% from -0.1%, according to its statement at the end of its two-day March policy meeting. The central bank abandoned its yield-curve control and ended most of its asset purchases aimed at policy easing.

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Is Japan deflation or inflation? ›

Japan has suffered from long-lasting but mild deflation since the latter half of the 1990s.

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Why Japanese banks are well placed to withstand banking crisis? ›

Most of Japanese Regional Bank Deposits Are Retail

in Tokyo, adding that even if bank share prices fall and some customers lose confidence, Japanese lenders have ample cash.

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What did the Bank of Japan do? ›

The BOJ is the Japanese central bank, which is responsible for issuing and handling currency and treasury securities, implementing monetary policy, maintaining the stability of the Japanese financial system, and providing settling and clearing services.

Why is Japanese yen so weak? ›

Interest rates and momentum are powerful forces in foreign exchange markets. Both are against the yen. The yen has been steadily falling for more than three years and has lost about a third of its value since the start of 2021.

Get More Info ›

Why does Japan have so much debt? ›

Essentially, the Japanese government's strategy is to borrow at an extremely cheap rate and invest in risky, high-return assets—a factor that partially explains why Japan can sustain a high level of debt despite running a consistent deficit.

Get More Info Here ›

Why is the Bank of Japan so important? ›

Through its conduct of monetary policy, the Bank aims at achieving price stability, thereby contributing to the stability of people's lives and sustainable development of the economy.

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What is BOJ monetary policy? ›

Under its massive stimulus programme, the BOJ currently guides short-term interest rates at minus 0.1%, caps the 10-year government bond yield around 0% and continues to buy huge amounts of assets such as government bonds.

Tell Me More ›

When was the last time BOJ intervened? ›

Japan last intervened in October 2022 as the yen plumbed lows near 152 per dollar. It was then estimated to have spent as much as 9.2 trillion yen ($60.78 billion) defending the currency. Here is a timeline of moves in foreign exchange markets by the Bank of Japan (BOJ).

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When did BOJ introduce negative interest rates? ›

The negative rate policy, which was implemented in 2016, had been a symbol of the BOJ's ultraloose monetary stimulus that lasted over a decade, and its end highlights how the central bank finally intends to roll back the complex policy settings crafted under previous Gov.

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Why Japan has no inflation? ›

Japan remains the only country to maintain ultra-low rates as other advanced economies have switched to tighter money policies as inflation surged. At the same time, Kiuchi noted, delaying for too long means the bank's balance sheet will continue to grow as it buys bonds to keep yields at zero or below.

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Does Japan have an inflation problem? ›

Japan's inflation rate ranged from a low of negative 1.35% to a high of 2.76% from 1995 to 2022. Consumer prices fell on an annual basis in 15 of those 28 years. Many saw Japan's inability to generate consistent, predictable price gains as an example of a central bank policy failure.

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Is the Japanese economy in trouble? ›

On a quarterly basis, GDP expanded 0.1 percent, revised up from an estimated 0.1 percent decline. Japan's government last month announced provisional figures showing that the economy had unexpectedly slipped into recession amid sluggish domestic demand and private consumption.

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What time is the Bank of Japan rate decision? ›

Historical Data Chart

Japan BoJ Interest Rate Decision is taking place on Thursday, April 25 th at 03:00 GMT.

What is the interest rate in the BOJ? ›

The leading plan is to raise the policy rate, currently at negative 0.1%, by more than 0.1 point to guide short-term interest to the 0%-0.1% range. Under the negative rate policy, the BOJ imposes an interest rate of minus 0.1% on certain deposits by financial institutions.