Japanese yen dips after BoJ meet

The Japanese yen has posted slight losses for a second straight day. Currently, USD/JPY is trading at 108.30, up 0.20% on the day.

BoJ pessimistic about inflation target

As expected, the BoJ held the course and did not make any changes to its current policy. In an 8-1 decision, the Board kept its policy rate at -0.10%, with no change to its yield curve control programme. The bank raised the GDP forecast to 4.0%, up slightly from 3.9%. However, the BoJ Core CPI guidance was revised downwards to 0.10%, down from 0.50%.

The BoJ meeting was nondescript, with the bank essentially staying in neutral gear. However, there was a significant admission with regard to the inflation target, which the bank has stubbornly pegged at 2 percent for years.

The BoJ forecasts indicated that the target of 2% would not be reached during BoJ Governor Kuroda’s term, which ends in 2023.  This target was adopted back in 2013, when the BoJ, together with the Japanese government coordinated policy in an attempt to kickstart the weak Japanese economy. The failure to reach inflation anywhere near 2 per cent in almost a decade is a significant failure on Kuroda’s part and raises the question of whether the 2% target should have been lowered years ago.

Shifting away from the BoJ, investors will be focussing on Retail Sales for March, which will be released at 23:50 GMT. The forecast for this key consumer spending indicator is a strong gain of 4.6%. Retail Sales have declined in the previous three readings, as Covid infection rates remain high and the vaccine rollout has been extremely slow. A strong gain in retail sales would point to a resurgence in consumer spending and would likely be bullish for the Japanese yen.

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USD/JPY Technical Analysis

• There is support at 107.29, followed by support at 106.71
• USD/JPY is putting pressure on resistance at 108.65. Above, there is resistance at 109.43

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