When is the BoJ and how might it affect USD/JPY?

The Bank of Japan is scheduled to deliver the outcome of its meeting today with the governor Kazuo Ueda to hold a news conference at 0630 GMT after the policy meeting. There is no firm time for the announcement of the decision but last time it was at 0230 GMT.

Markets aren’t expecting any changes at this meeting, but the fact that Japan is now recording the highest inflation since 1981 suggests that pressure for a change in policy is on the up. Leading up to the meeting, Tokyo CPI inflation numbers released showed a YoY price growth of 3.5% in April. ´´That’s two ticks higher than expected, and the core readings look even stronger,´´ analysts at Rabobank said. ´´

Meanwhile,´´ they said, ´´the Japanese jobless rate rose to 2.8% when it was expected to fall one tick to 2.5%. That all looks stagflationary too, but new BOJ Governor Ueda has said that the economy is past the peak for cost-push inflation.´´

In the media today, the Nikkei reported that the BoJ will forego revising YCC and will discuss a revision of forward guidance.

´´We think it is highly likely that a formal policy review is announced. That should put the next YCC shift as early as June. Generally, we think assuming a YCC change sooner rather than later is a prudent strategy,´´ analysts at TD Securities said.

´´Lifting the yield cap to 1% as its next move has a lot of appeal,´´ they analysts said.

´´The BOJ will not provide advance warning to a YCC change and will instead prefer to do it when it is least expected. As such, one cannot fully rule out a change at any meeting. We also think they would prefer to make a shift when the Fed has neared or completed its tightening cycle as there is less natural upward pressure to push global yields higher.´´

How will USD/JPY react?

The analysts at TD Securities argue that there could be some yen upside through the meeting via a 1m 132/129 USD/JPY put-spread. ´´The yen should trade with an asymmetric bias.´´

such a view plays into the W-formation and bear pennant on the weekly chart. 

The daily chart has already seen the price break structure which leaves the bias bearish while below 134.48-73 /135.14 peak formation highs. A break of 133.01 will be a significant bearish development if that occurs in the coming sessions. 

About the BoJ

BoJ Interest Rate Decision is announced by the Bank of Japan. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the JPY. Likewise, if the BoJ has a dovish view on the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.