USD/JPY continues to remain bullish, buying dips at every turn. The currency pair hit a new high today at 144.90 since November last year, approaching the big round level of 145. The Bank of Japan has suggested it may intervene to support currency depreciation if it breaks above the 145 level.
Yen continues to come under pressure due to monetary policy divergence between Fed and Bank of Japan. Fed Chairman Jerome Powell reiterated the central bank’s hawkish stance in a speech at the ECB forum in Sintra earlier this week, signaling the possibility of another rate hike. Powell also said inflation would not hit the Fed’s 2% target until 2025.
Meanwhile, the Bank of Japan has maintained a dovish stance, keeping interest rates in negative territory, even though Japan’s inflation rate is much lower than in the United States and Europe. But the BOJ has escalated its rhetoric on intervention, suggesting that the yen’s plunge could prompt officials to act. However, as Mr. Himino, a member of the Bank of Japan, pointed out today, the possibility of an interest rate hike is extremely low.Therefore, we continue to maintain our bullish bias USD/JPY And we’re looking for lower retrace so we can go long.
Comment from Mr. Himino
- Bank of Japan needs to scrutinize new factors pushing up prices
- Recent rise in Japanese CPI is moderate compared to US and Europe, but stronger than previously expected
- While the pass-through of import price hikes is expanding, new factors such as labor shortages and strong domestic demand may also be having an impact.
- Passing on of higher import prices remains the dominant factor, but the BOJ needs to scrutinize the contribution of new factors pushing up prices
- No signs of risk of too high inflation in Japan, many factors need to be considered
- We need to be vigilant about the impact of market signals and market movements on the Japanese economy.
There is currently a prevalence of the idea that ‘inflation is temporary’ in Japan, but from my standpoint there is a very strong argument for mitigation from YCC in terms of risk management approach. The Bank of Japan meeting in July will be interesting.
USD/JPY
