Is BOJ’s intervention hiding behind inflation data?

  • The Bank of Japan (BOJ) is shifting its policy approach to place less emphasis on inflation targeting, suggesting a more flexible stance in setting monetary policy.
  • Additionally, speculation persists about possible intervention by the BOJ in the forex market.

Japanese inflation data is scheduled for release on Thursday, but its impact on the market might be subdued. Investors could prefer to pay attention to next week’s quarterly growth and price forecasts from the Bank of Japan, which could be the real market movers. 

According to sources cited by Reuters, the Bank of Japan is transitioning towards a more flexible approach in its policy decisions, placing less emphasis on inflation targeting. 

The upcoming April 25-26 policy meeting will see the release of the Bank’s quarterly growth and price projections. This shift in strategy suggests that the Bank of Japan may signal a willingness to raise interest rates irrespective of inflation forecasts, which are anticipated to remain around 2.8% or possibly dip slightly to 2.7%. 

On the technical side, the USDJPY pair could maintain an upward bias, with buyers potentially pushing it towards the 155.00 mark. 

Recent fluctuations in the USDJPY pair have prompted speculation about possible intervention by the Bank of Japan. After hitting a new high dating back to 1990 at 154.705, the pair experienced a swift and unusual downturn. Market watchers are closely monitoring the 155.00 level, considered another more likely potential intervention threshold by the Bank of Japan. 

Following a dip to 153.890, the pair rebounded towards 154.775, supported by neutral to hawkish remarks from US Federal Reserve officials. Fed Chair Powell, speaking at a panel discussion in Washington, highlighted the strength of the labor market and progress on inflation, suggesting the Bank was comfortable with allowing “restrictive policy further time to work”. 

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