Japanese Yen Forecast: Will Rising Inflation Pressure BoJ to Shift Rate Path?

Japan’s Inflation Rate and the Bank of Japan Rate Path

On Friday, September 20, inflation figures for Japan will impact buyer demand for the USD/JPY pair.

Economists forecast the annual inflation rate to edge up from 2.8% in July to 3.0% in August. A higher-than-expected inflation rate could fuel speculation about a possible Q4 2024 BoJ rate hike. A more hawkish BoJ rate path could raise borrowing costs, possibly lowering disposable income and consumer spending. Downward trends in consumer spending might dampen inflation pressures.

Later in the Friday morning session, the BoJ will deliver its interest rate decision. Hotter-than-expected inflation numbers could pressure the BoJ to signal a Q4 2024 rate hike, possibly sending the USD/JPY toward 139.5.

Economists expect the Bank of Japan to hold interest rates steady, placing a greater emphasis on the press conference. Support for a December BoJ rate hike could bolster demand for the Yen, dragging the USD/JPY lower.

Bank of Japan Policy Guidance and Expert Views

According to a CNBC International survey, 32 analysts in the poll expect the BoJ to hold interest rates steady on Friday. The results for October and December reflected a high degree of uncertainty as Q4 approaches. 56.25% of those polled expect the BoJ to leave rates unchanged in October, with 43.75% predicting a hold in December.

FOMC Member Commentary in Focus

Later in the Friday session, investors should track comments from the Fed. Philly Fed President Patrick Harker is on the calendar to speak.

His views on the timing and size of the next rate cut could influence US dollar demand. Support for aggressive rate cuts in November and December could pull the USD/JPY down through 139.5. In August, the Philly Fed President had voiced support for 2 to 3 rate cuts before Wednesday’s 50-basis point interest rate cut.

However, comments regarding the labor market and economic outlook will also be crucial amidst hopes of a soft US landing.

Short-term Forecast for USD/JPY

USD/JPY trends will depend on Japan’s inflation numbers and the BoJ interest rate decision. Higher-than-expected inflation figures and a hawkish Bank of Japan stance on interest rates may push the USD/JPY pair down toward 139.5.

Investors should remain alert, with the BoJ’s interest rate decision crucial for the USD/JPY pair. Monitor real-time data, central bank views, and expert commentary to adjust your trading strategies accordingly. Stay ahead of the market with our expert insights.

USD/JPY Technical Analysis

Daily Chart

The USD/JPY hovers well below the 50-day and 200-day EMAs, confirming bearish price trends.

A USD/JPY breakout from 143 could signal a move toward the 143.495 resistance level. Furthermore, a break above the 143.495 resistance level may give the bulls a run at the 145.891 resistance level.

Inflation figures from Japan, the BoJ interest rate decision, and central bank commentary require consideration.

Conversely, a break below the 141.032 support level could signal a drop toward the September 16 low of 139.576. A fall through 139.576 may give the bears a run at the 137.712 support level.

The 14-day RSI at 41.20 suggests a USD/JPY drop below the 141.032 support level before entering oversold territory.