Bank of Japan Monetary Policy Decision Sends the USD/JPY to 156

The Bank of Japan Left Monetary Policy Unchanged

On Friday (April 26), the Bank of Japan delivered its first monetary policy decision since exiting negative rates in March.

According to the Statement on Monetary Policy,

• The BoJ will support the uncollateralized overnight call rate between 0-0.1%.
• The BoJ will continue conducting bond purchases per the March 2024 decisions.

According to the BoJ Outlook Report,

• The economy will likely continue growing above its potential growth rate.
• Year-on-year, the BoJ expects the annual inflation rate to be in the 2.5-3.0% range for 2024 and 2% for 2025 and 2026.
• The BoJ projections for growth in 2023 and 2024 were lower than in the previous Outlook Reports due to weaker private consumption.
• However, 2024 projections for core inflation were higher.
• Risks to the outlook included uncertainties about economic activity and prices.
• Several factors could fuel the uncertainties, including domestic wage and price-setting trends.

USD/JPY Reaction to the BoJ Monetary Policy Decision

Before the BoJ monetary policy decision and Outlook Report, the USD/JPY fell to a low of 155.510 before rising to a high of 155.659.

In response to the BoJ monetary policy decision and Outlook Report, the USD/JPY fell to a low of 155.408 before surging to 156.136.

On Friday (April 26), the USD/JPY was up 0.31% to 156.135.

Up Next

The Bank of Japan press conference will be the focal point for investors. Views on the Japanese Yen, inflation, the economic outlook, and the timeline for interest rate hikes need investor consideration.

Recently, the BoJ sent mixed signals about the interest rate trajectory. The BoJ warned against expectations of multiple rate hikes. However, the BoJ also stated that a continued acceleration of inflation toward the 2% target would warrant a BoJ response.

Later in the session, the US economic calendar will be in the spotlight. The US Personal Income and Expenditures Report will warrant investor attention.

Economists forecast personal income and spending to increase by 0.5% and 0.6% in March, respectively. In February, personal income and spending advanced by 0.3% and 0.8%, respectively.

Moreover, economists expect the Core PCE Price Index to increase 2.6% year-on-year in March. The Core PCE Price Index rose by 2.8% year-on-year in February.

A hotter-than-expected Personal Income and Expenditures Report could sink bets on multiple 2024 Fed rate cuts.