Early Friday, the Bank of Japan (BoJ) will make the decision on its emergency monetary policy meeting. The central bank is expected to largely announce stimulus packages for small businesses and financial institutions at the unanticipated meeting, while maintaining the short-term interest rate target at -0.1% and directing yields on 10-year government bonds toward zero.
However, the tone of the central bank’s statement towards general policy measures will be crucial for traders of the Japanese yen (JPY). Even though BOJ Governor Haruhiko Kuroda recently started to follow in the footsteps of other big central bankers while defying negative rates, his willingness to do whatever is necessary makes every BOJ meet the key.
Westpac follows the broad market consensus by saying:
The Bank of Japan will also hold an ad hoc meeting with no changes planned in key policy parameters, but rather on the details of a financing program for small businesses.
How could this affect the USD / JPY?
While the BOJ meeting is less likely to offer a major change in monetary policy, the Japanese central bank remains ready to act, as always, which in turn gives way to a surprise signal of future movements. It should be mentioned that BOJ Governor Kuroda has already minimized negative interest rates and that details of the addition to Quantitative Easing (QE) will therefore be sought. If the BOJ manages to keep a bearish tone, the USD / JPY could refresh the monthly high above the resistance of 108.10.
Technically, the USD / JPY pair has struggled since mid-April to cross 108.10, which holds the key to the price rise to the April monthly high around 109.40. On the contrary, an ascending trend line from May 07, at 107.55 now, can check sellers during the new fall.
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About BoJ Rate Decision
The BoJ interest rate decision was announced by the Bank of Japan. Generally, if the BoJ is hawkish about the inflationary outlook for the economy and increases interest rates, it is positive, or bullish, for the JPY. Likewise, if the BoJ has an accommodating view of the Japanese economy and keeps the current interest rate, or lowers the interest rate, it is negative or bearish.