USDJPY – Daily Chart
USDJPY has three important levels ahead of the BOJ decision. The recent highs around the 156.75-158 level are a pivot with the 150 marking the downside support and the larger upside at 161.82.
There is no official time for the interest rate decision but it is suggested to be after 10am HKT with the BOJ Q4 outlook at 11am and the press conference set for 14:30pm.
The Bank of Japan is expected to raise rates this week with markets calm following the inauguration of Donald Trump.
“The BOJ has sent out a clear message that a rate hike will be on the table, so I think the possibility of raising rates is quite high,” said Masahiro Ichikawa at Sumitomo Mitsui.
According to a recent Bloomberg survey, more than 70% of economists expected the central bank to raise its short-term policy rate from 0.25%. Others expect a move in March from the BOJ.
The outlook for Japan has been clouded by questions around the first days of the Trump administration, with the fear of aggressive tariffs. That could hurt the export-dependent Japanese companies. The BOJ left rates unchanged because it wanted to wait and see how Trump would affect markets.
“The outlook for the global economy, especially the US, remains vague, while the economic policies of the next US administration are still largely uncertain,” Governor Kazuo Ueda said after the previous meeting.
The BOJ Deputy Governor Ryozo Himino said last week that the bank will decide after looking at the big picture but admitted that the US economy is “one major factor”.
The BOJ move may be anticipated this week with the potential for no increase on tariff fears. That could lead to USD strength but a rate increase could boost the JPY.
The US dollar was weaker after the Davos appearance of Donald Trump who reiterated tariff threats and a desire for lower oil prices. Jobless claims were little changed this week and helped to keep the dollar strong.
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