The Bank of Japan's policy interest rate has been raised by 1%, but USD/JPY isn't moving—why? When will it move?
The Bank of Japan's policy rate was raised to 1%, but the USDJPY hasn’t moved. Why? When will it move?
To get to the point,
“The Japanese central bank’s raise to 1% was largely priced in beforehand.”
The market had been predicting this rate hike for quite some time
In reality, even after the rate hike announcement, the USDJPY did not move much around 160 yen
Simply put, the reason it hasn’t moved is
BOJ → 1.0%
FRB → about 3.5–3.75%
The interest rate gap between Japan and the U.S. is still large
Even if it goes from 0.75% to 1.0%,
there isn’t a strong impulse to “buy yen and sell dollar.”
So when will it move?
Personally,
① When the FRB hints at rate cuts
② When the BOJ hints at additional rate hikes
③ When forex intervention fears intensify in the high-160s to 161 yen range
Any of these could be a major trigger
The market already has the view
“The BOJ might raise to around 1.25% by year-end”
as well.
So,
BOJ 1% → as expected
BOJ 1.25% → a mild surprise
BOJ 1.5%+ → a major yen-strength catalyst
is the impression
From a trader’s perspective, what’s important is
Right now, the USDJPY reacts more to the “FRB” than to the “BOJ.”
It’s easier to move the pair if the FOMC says
“two rate cuts within the year.”
than if the BOJ moves 0.25%.
Looking at the current chart,
energy is being accumulated around the 160 yen level
so the next substantial move candidates are
this week's FOMC
late June US PCE
July US jobs report
and expectations for the next BOJ meeting
around there.
Rather, now it’s not a case of
“they raised and it didn’t move,”
but of
“there isn’t yet a reason to buy yen even after a rate hike.”
The market is determining that.
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