USD/JPY Sets Fresh 20-Year Highs, as BoJ Maintains Ultra Loose Policy


BoJ Ultra Easy Monetary Policy

The Bank of Japan (BoJ) kept interest rates at -0.1% today, will continue with Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control in order to achieve the 2% inflation target and expects short- and long-term policy interest rates to remain at their present or lower levels. [1]

After another round of intervention in the bond market this week, the central bank reiterated its pledge to buy limitless amount of government bonds (JGBs), so that the 10-year yield will remain at around zero percent, adding that it will offer to purchase 10-year JGBs at 0.25% on every business day.

The central bank also released its updated economic projections, which see higher inflation and slower growth for the current 2022 fiscal year. In particular, median CPI inflation forecast was raised to 1.9%, from 1.1% in the previous projection, while median forecast for GDP is now 2.9%, from 3.8% projected in January. [2]

The central bank's activity harms the Japanese Yen and while a weak currency is generally viewed as helpful for the country's exporting activity, inflation and higher energy and commodity prices create problems. We have seen some commentary recently, warning of this, while a Reuters poll earlier in the month, showed the majority of Japanese companies are worried over the Yen's weakness. [3]

Monetary Policy Divergence

The Bank of Japan maintains its uber-easy monetary policy, which is in stark contrast with its major counterparts, including the US Federal Reserve, which has embarked on an aggressive tightening path in order to combat surging inflation.

Trade the News: View our Economic Calendar

The Fed hiked rates by 25 basis points in March and concluded its asset purchases program, which expanded its balance sheet to nearly $9 trillion. Since then, officials have hinted that the reduction process could begin as early as at next week's meeting, while pointing towards a larger 50 basis points increase in interest rates.

Chair Powell alluded to that prospect with his remarks in a panel discussion of the International Monetary Fund last Thursday, saying that "I would say 50 basis points will be on the table for the May meeting". [4]

USD/JPY Analysis

The policy differential between the two central banks is the main driver of the Yen's weakness against the greenback and don't allow it to benefit from various risk factors and take advantage of its safe-haven status. The pair runs its eight straight profitable weak, which is the longest streak since 2013, while rallying around 8% in April, heading towards potentially the best month since 2016.

After today's BoJ announcement, USD/JPY rose to fresh twenty-year highs, with around 1.5% of gains. It now sets its sight to the 131.62-132.05 region, but it may be early to talk about 133.89.

From a purely technical prospective the move is stretched, while month-end flows could potentially work against it, given April's massive rally. As such, a pulback that could test 129.00 would not be surprising, but a strong catalyst would be required for a bigger correction towards 126.96-88.

From today's economic calendar, we expect US Q1 GDP and on Friday US PCE inflation stands out, while Japan gears up for the Golden Week holidays (May 3-5), while the country's stock market will also be closed tomorrow.

Nikos Tzabouras

Senior Market Specialist

Nikos Tzabouras is a graduate of the Department of International & European Economic Studies at the Athens University of Economics and Business. He has a long time presence at FXCM, as he joined the company in 2011. He has served from multiple positions, but specializes in financial market analysis and commentary.

With his educational background in international relations, he emphasizes not only on Technical Analysis but also in Fundamental Analysis and Geopolitics – which have been having increasing impact on financial markets. He has longtime experience in market analysis and as a host of educational trading courses via online and in-person sessions and conferences.



Retrieved 28 Apr 2022


Retrieved 28 Apr 2022


Retrieved 28 Apr 2022


Retrieved 26 Nov 2022


Any opinions, news, research, analyses, prices, other information, or links to third-party sites contained on this website are provided on an "as-is" basis, as general market commentary and do not constitute investment advice. The market commentary has not been prepared in accordance with legal requirements designed to promote the independence of investment research, and it is therefore not subject to any prohibition on dealing ahead of dissemination. Although this commentary is not produced by an independent source, FXCM takes all sufficient steps to eliminate or prevent any conflicts of interests arising out of the production and dissemination of this communication. The employees of FXCM commit to acting in the clients' best interests and represent their views without misleading, deceiving, or otherwise impairing the clients' ability to make informed investment decisions. For more information about the FXCM's internal organizational and administrative arrangements for the prevention of conflicts, please refer to the Firms' Managing Conflicts Policy. Please ensure that you read and understand our Full Disclaimer and Liability provision concerning the foregoing Information, which can be accessed here.

Past Performance: Past Performance is not an indicator of future results.

Spreads Widget: When static spreads are displayed, the figures reflect a time-stamped snapshot as of when the market closes. Spreads are variable and are subject to delay. Single Share prices are subject to a 15 minute delay. The spread figures are for informational purposes only. FXCM is not liable for errors, omissions or delays, or for actions relying on this information.

Risk Warning: Our service includes products that are traded on margin and carry a risk of losses in excess of your deposited funds. The products may not be suitable for all investors. Please ensure that you fully understand the risks involved.

${} / ${getInstrumentData.ticker} /

Exchange: ${}

${} ${getInstrumentData.divCcy} ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%) ${getInstrumentData.priceChange} (${getInstrumentData.percentChange}%)

${getInstrumentData.oneYearLow} 52/wk Range ${getInstrumentData.oneYearHigh}