When is the BOJ rate decision and how could it affect USD/JPY?

Early on Friday, around 03:00 AM GMT, the Bank of Japan (BOJ) will provide the decision of its routine monetary policy meeting. Following the rate decision, BOJ Governor Haruhiko Kuroda will attend the press conference, around 06:00 AM GMT, to convey the logic behind the latest policy moves.

The Japanese central bank is widely expected to keep the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero.

Although the BOJ isn’t expected to offer any change in its monetary policy, the recently hawkish play of the lead central bankers from the West, namely the Fed, BOE and the ECB, could push Governor Kuroda and company to stay tight-lipped if they’re bearish. Even so, Omicron's woes can help the policymakers to convey the economic fears.

Hence, today’s monetary policy meeting is less likely to become a non-event like always.

Ahead of the event, Westpac said,

The Bank of Japan is set to keep its policy on hold again, with the 10-year JGB yield target at 0.0% and the policy balance rate at -0.1%. There has been no inflation surge in Japan, with core inflation -0.7%yr in October.

 Additionally, TD Securities said,

We expect the BoJ to leave all its policy settings unchanged: policy rate at -0.1%, 10-yr yield target at 0%. The market is likely to watch for clues on the Bank's plans for COVID aid for businesses, which are due to end in March 2022. Given the uncertainty over Omicron, we think an extension of the COVID aid on a smaller scale is likely, but the Bank may choose to wait until the January meeting to make the decision.

How could it affect the USD/JPY?

USD/JPY retreats to 113.70 after an initial attempt to consolidate the previous day’s losses. The pair’s downbeat performance could be linked to mixed concerns over the South African version of covid and escalating Sino-American tussles. On the same line could be mildly bid stock futures even as the recent central bank actions were hawkish.

It’s worth noting that the Bank of Japan (BOJ) has been actively intervening in the markets during the past few days and has already signaled firming up the inflation. The same might back Governor Kuroda to hint at the faster tapering of bond purchases. However, it’s not like the Japanese central bank to turn hawkish, especially when the Omicron woes loom, which in turn could keep the bears hopeful of an extended period of easy money.

That said, the USD/JPY prices are less likely to react to the BOJ until any major issues are raised by Kuroda, which in turn could weigh on the quote. However, risk catalysts are more important for near-term direction.

Technically, short-term rising wedge tests USD/JPY traders as a clear downside break of 113.60 will direct the pair towards the monthly low near 112.55 while 200-SMA restricts immediate upside near 113.90.

Key Notes

BoJ Preview: Forecasts from six major banks, reviewing covid aid package

USD/JPY Price Analysis: Bulls in play, but bears waiting to pounce

About BoJ Rate Decision

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.