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The BOJ’s policy decision is up this week! Will Kuroda try to temper the yen’s gains by jawboning it? Or will he shrug it off in favor of instilling confidence in the central bank’s policies?

BOJ’s policy statement (Mar 9, Asian session)

Can you believe the BOJ actually moved the yen last week?

Apparently, BOJ Governor Kuroda and his gang are getting more confident on the direction of inflation and economic growth. In fact, they even did a “tiny taper” last week, a move that yen bulls partied in the pip streets over.

This week market players are expecting the central bank to stay pay on their existing policies. Take note, however, that there will be a presser with the decision.

Will Kuroda try to temper the yen’s gains by jawboning it? Or will he shrug off the yen’s price action in favor of sharing their optimism over the BOJ’s policies and their impact on inflation?

Overall risk sentiment

As mentioned below, the yen still very much responds to bond yields and catalysts that affect bond prices.

As if speeches by major central bank officials are not enough, we’ll also deal with NFP week shenanigans this week. And last but not the least, we might hear chatter about a possible trade war between the world’s largest economies, as well as economic risks from a “twin deficit.”

Make sure you stay on top of your game for unscheduled updates that might affect your yen (and high-yielding) bets!

Last Week’s Price Review

The yen is currently the best-performing currency of the week (as of 9 am GMT). This marks the fourth consecutive week of broad-based yen strength. And did I mention that the yen was the top-performing currency in three of those four weeks? I bet yen bulls are really having a blast, huh?

Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart
Overlay of Inverted JPY Pairs & US10Y Bond Yield (Black Line): 1-Hour Forex Chart

As always yen pairs were taking directional cues from bond yields. However, bond yields were not the only drivers for the yen’s price action.

This can be plainly seen when bond yields surged due to New Fed Chair Powell’s hawkish testimony on Tuesday. However, Powell’s testimony also caused risk sentiment to sour, and the safe-haven yen was apparently a beneficiary of all that risk aversion.

The other main driver for the yen’s price action this week is (and I can’t believe I’m writing this) the BOJ.

As for specifics, bond yields continued to rise during Wednesday’s Asian session. However, the BOJ did a “tiny taper” when it cut its purchases of JGBs with 25-40 years maturity by ‎‎¥10B from ‎‎¥80B JPY to ‎‎¥70B.

The other instance happened on Friday when BOJ Shogun Kuroda mentioned that the BOJ may start thinking about exiting the BOJ’s super loose monetary policy if its inflation target is reached by March 2020.

Anyhow, another good run for the yen. Perhaps the BOJ will have more to say in next week’s BOJ statement. If so, then maybe the BOJ statement will actually be a market-moving event once again.