USD/JPY – Yen climbs to 4.5 month high, BOJ next

• BoJ to make rate announcement on Tuesday
• Fed’s Williams says no rate cuts planned

The Japanese yen is lower at the start of the week. In the European session, USD/JPY is trading at 142.77, up 0.44%.

The yen continues to power higher and surged 1.9% last week. It marked a fifth straight winning week for the yen, which has climbed 6.2% during that time. The yen strengthened to 140.95 on Thursday, its highest level since July 31.

Will BoJ make a move?

Bank of Japan policy meetings have become must-see events, with investors on edge over speculation that the central bank is planning to tighten policy. Tuesday’s meeting will be closely watched, especially after hints from senior BoJ officials that it could phase out negative rates, which would be a sea-change in policy that would likely boost the yen. The BoJ might not announce any changes at the meeting, but I doubt that will quell speculation that a policy change is coming. The BoJ tends to hold its cards close to its chest, maximizing the surprise effect of any policy moves.

The BoJ has been an outlier among central banks in sticking to an ultra-loose policy while its peers were busy raising rates, and the BoJ is expected to tighten policy next year while other major central banks are looking to cut rates. The BoJ has long insisted that inflation is not sustainable, but that position has become difficult to defend, as inflation has remained above the 2% target month after month.

New York Fed President John Williams said on Friday that the Fed was not discussing rate cuts and that the Fed could tighten policy if inflation stalled or reversed directions. The markets don’t seem to be listening, however, and have priced in six rate cuts next year, starting as soon as March. At last week’s meeting, Fed Chair Jerome Powell finally jumped on the rate-cut bandwagon and said that the Fed would cut rates three times in 2024.

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USD/JPY Technical

• USD/JPY is testing resistance at 142.61. Above, there is resistance at 143.06
• There is support at 142.02 and 141.57

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