empty
02.05.2024 01:41 AM
Bank of Japan is trapped and increasingly dependent on the Fed's stance. Overview of USD/JPY

Apparently, the Japanese authorities did conduct a currency intervention on April 29th. The USD/JPY pair came close to the 160 mark, after which it quickly fell to 154.50.

A weak yen carries too many problems for the Japanese economy. Rapid currency depreciation leads to higher import costs, which, amid the threat of persistent inflation, may trigger a rise in domestic inflation in Japan in the second half of the year.

The main driver of the yen's weakness is the yield spread between US and Japanese bonds.

This image is no longer relevant

As the forecast for the Federal Reserve rate cut continues to shift further and further into 2025, and the Bank of Japan exhibits manic caution and hesitates to raise rates, any confirmation of this scenario will push USD/JPY higher, forcing Japanese authorities to intervene again and again. This will continue until the yield spread starts changing in the opposite direction.

However, this can only happen after the first Fed rate cut, and the further the rate forecast shifts, the stronger the pressure mounts on the yen.

As expected, the BOJ kept its monetary policy unchanged. Unlike the March meeting, where the decision was made to raise rates and end the yield curve control program, the decision was unanimous, indicating that the BOJ has paused while waiting for specific details from the Fed. New forecasts were also published, with the Bank expecting inflation to reach 2.1% by the fiscal year 2026. Markets interpret the forecast change as a decision to raise rates by 0.1% in the near future, but take note that there are no clear dates in the final statement or at the press conference.

The net short JPY position increased by $1.15 billion to -$14.5 billion over the reporting week. The bearish bias remains intact with no signs of a reversal. The price is rapidly rising.

This image is no longer relevant

In the long term, nothing has changed for the yen. A pullback after an intervention cannot have a long-term impact. The pair will likely move towards the 160 level again, probably followed by another intervention. The trading strategy in the current conditions involves selling just below the 160 level in anticipation of an intervention, which is quite risky but may be successful as long as the BOJ remains constrained by the prevailing situation.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Summary
Urgency
Analytic
Evgeny Klimov
Start trade
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

EU Prepares to Retaliate

Over the weekend, it was revealed that the United States will impose 30% tariffs on all goods from the European Union starting August 1. In response, the EU is preparing

Jakub Novak 11:21 2025-07-14 UTC+2

Trump Continues to Pressure U.S. Trade Partners (Potential Resumption of USD/JPY and Ethereum Growth)

The United States, through its president, continues to exert economic—and arguably geopolitical—pressure on its trade partners, which is having a ricochet effect on global trade and financial markets. But, oddly

Pati Gani 10:00 2025-07-14 UTC+2

Do Markets Like Tariffs?

Everyone sees what they want to see. For Donald Trump, the S&P 500 rally to record highs is proof that the market likes tariffs. For investors, it's a sign

Marek Petkovich 09:06 2025-07-14 UTC+2

What to Pay Attention to on July 14? A Breakdown of Fundamental Events for Beginners

There are no macroeconomic reports scheduled for Monday. Let us recall that last week, there were also no significant reports, speeches, or any other notable events in either the European

Paolo Greco 06:30 2025-07-14 UTC+2

GBP/USD Overview – July 14. Keep Calm and Carry On

The GBP/USD currency pair showed a rather significant decline on Friday. Overall, the British currency has been falling for two weeks now, and this is a very important fact that

Paolo Greco 04:33 2025-07-14 UTC+2

EUR/USD Overview – July 14. The Fed's and Trump's Positions Remain Unchanged

The EUR/USD currency pair continued a mild and weak downward movement on Friday. As we have mentioned many times before, the current move is a pure correction, so there

Paolo Greco 04:33 2025-07-14 UTC+2

The Dollar Is Becoming a Risk Currency

In my reviews, I've regularly noted that the decline in demand for the U.S. dollar is not just a matter of price depreciation. We're talking about a currency that

Chin Zhao 00:42 2025-07-14 UTC+2

The Market Believes Trump Will Back Down

What is happening in the financial markets right now can only be described as a paradox, and many economists are noting it. Take the U.S. stock market, for example: initially

Chin Zhao 00:42 2025-07-14 UTC+2

EUR/USD. Weekly Preview: U.S. Inflation, Retail Sales, ZEW Indices, and China's GDP

The upcoming trading week will be marked by U.S. inflation data. Reports on CPI and PPI growth will be released, along with the University of Michigan Consumer Sentiment Index. However

Irina Manzenko 00:41 2025-07-14 UTC+2

U.S. Dollar. Weekly Preview

In the upcoming week in the U.S., reports on inflation and industrial production will be released, along with a few other moderately interesting indicators. The most important one is undoubtedly

Chin Zhao 00:41 2025-07-14 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.