Bank of Japan Leaves Rates at 0.25% as Fed Fallout Drives the USD/JPY

The Bank of Japan Keeps Rates Steady at 0.25%

Steady at 0.25%—the Bank of Japan’s latest move keeps markets on edge, with USD/JPY primed for another volatile swing as traders eye Governor Ueda’s next signal.

On Thursday, December 19, the Bank of Japan kept interest rates steady at 0.25%, a decision that aligned with market expectations.

According to the Bank’s Statement on Monetary Policy, the Board voted by a majority of 8:1 to ‘encourage the uncollateralized overnight call rate to remain at around 0.25 percent.’

Key points from the Statement of Monetary Policy included:

• Japan’s economy has recovered moderately, although some weakness has been seen in part.
• The employment and income situation has improved moderately.
• Private consumption has been on a moderate increasing trend despite the impact of price rises and other factors.
• The year-on-year rate of increase in the consumer price index has been in the range of 2.0-2.5% recently, driven by services prices.
• Underlying CPI inflation is expected to increase gradually.
• Medium-to-long-term inflation expectations will likely rise with a virtuous cycle between wages and prices continuing to intensify.
• Risks to the outlook include uncertainties about Japan’s economy and prices and developments overseas.

What the Experts Said

StoneX Market Analyst David Scutt commented on the potential USD/JPY response to the BOJ hold, saying,

“Rarely have to adjust levels on the USD/JPY daily chart. Right now, the message from the price action and momentum is the November highs look set for a retest.”

The USD/JPY climbed to a November high of 156.744 before pulling back.

How did the USD/JPY React to the BoJ Monetary Policy Decision?

Before the BoJ monetary policy decision and Statement, the USD/JPY fell to a low of 154.428 before climbing to a high of 155.078.

In response to the BoJ decision, the USD/JPY fell to a low of 154.950 before advancing to a high of 155.353.

On Thursday, December 19, the USD/JPY was up 0.30% to 155.282.

Up Next

Looking ahead, all eyes will be on Bank of Japan Governor Kazuo Ueda’s press conference. Hints of an interest rate hike could impact the global markets. Traders should brace for potential volatility as forward guidance will influence the USD/JPY and broader market sentiment.

Stay tuned for pivotal insights that could influence trading strategies in the weeks ahead.