Bank of Japan undecided on rate hike, yen lower

The Japanese yen is in negative territory on Tuesday. In the North American session, USD/JPY is trading at 154.44 up 0.46% on the day.

No clarity from BoJ summary of opinions

The Bank of Japan summary of opinions indicated a lack of clear direction regarding the timing of a rate hike. This will leave traders guessing as to whether the BoJ will wait until early next year, which seems the most likely scenario. Still, a December hike is on the table, as inflation remains high and the yen is struggling. At the same time, the political instability in Japan and the transfer of power in the US has resulted in considerable political uncertainty, which supports the case to hold rates until next year.

The BoJ has never made transparency a priority, in stark distinction to the Federal Reserve which took pains to telegraph its intent to lower rates earlier this month. The BoJ has surprised the markets in the past, which could be part of its effort to discourage yen speculators.

The BoJ meets next on Dec. 19 and key data such as inflation and GDP will be important factors ahead of the rate decision at the December meeting. As well, wages have been rising and the BoJ is hopeful that will translate into increased consumer spending and demand-driven inflation. Consumer spending makes up more than half of the economy and BoJ is unlikely to make further rate hikes until it sees stronger consumer spending.

In the US, there are no major events on the data calendar but investors will be listening closely as a number of FOMC members make public remarks today. The Federal Reserve is expected to continue to trim rates, with the markets pricing in a cut of 25 basis points at 65%, according to the CME’s FedWatch.

USD/JPY Technical

• There is resistance at 154.76 and 155.57
• USD/JPY tested support at 1.5425 earlier. Below, there is support at 153.44

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at info@marketpulse.com. Visit https://www.marketpulse.com/ to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.