Yen depreciation and undesirable volatility have been persistent concerns for Japanese officials, but the latest US CPI data has provided some respite. The Bank of Japan (BoJ) is scheduled to meet early Friday morning, with expectations of a shift towards easing aggressive bond-buying policies. This would allow Japanese Government bond yields to rise freely above 1%, marking a step towards normalization without destabilizing markets.

Japan's economy faces significant challenges, complicating a more rapid rate-hiking cycle. There are ongoing doubts about the sustainability of inflation above 2% over the medium term, and officials have emphasized the need for wage pressures to persist beyond annual negotiations. A commitment to slowing bond purchases could support the yen, though market perception of BoJ's actions will be crucial in determining the yen's response.

USD/JPY is trending lower, with the 50-day simple moving average (SMA) and the psychological level of 155.00 in focus. Key resistance is at 157.70.

USD/JPY Pulls Back Ahead of the BOJ Meeting

Jun 13 2024

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