• The Japanese yen rose against the US dollar in the middle of the trading week after the Bank of Japan raised its benchmark interest rate by up to 25 basis points.
• Also, the monetary authorities outlined a plan for how to reduce the institution’s bond-buying program.
• Accordingly, the US dollar against the Japanese yen USD/JPY fell to the support level of 148.52, its lowest level in more than four months.
• It is holding around the 150.00 level at the time of writing and may remain bearish until the US jobs numbers are announced tomorrow.

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For their part, Bank of Japan officials raised the benchmark interest rate to “around 0.25%,” up from the previous range of 0% to 0.1%. The central bank’s interest rate is now at its highest level since 2008. At the same time, monetary policymakers acknowledged that real interest rates will be “significantly negative” in the near future, with financial conditions favorable to support economic activity. Core inflation, which excludes food, is expected to rise to 2.5% by the end of fiscal 2024 and then ease to around 2% in 2025 and 2026. The fiscal year runs from April 1 to March 31.

Meanwhile, the Bank of Japan announced that it would reduce its monthly purchases of government bonds to less than $20 billion per month in the first quarter of January to March 2026. Today, monthly bond purchases are equivalent to around $40 billion. However, authorities say they will be flexible on both interest rates and bond purchases based on the performance of Japan, the world’s fourth-largest economy.

Japanese financial markets rallied on the news, with the Nikkei index up 575 points, or 1.49%, to 39,101.

Japanese government bond yields were broadly higher, including on 10-year bonds, which rose above 1%. Three-month Japanese Treasuries rose 4.2 basis points to 0.157%, while 30-year Treasuries rose 4.8 basis points to 2.169%.

According to Forex trading, the Japanese yen has been under fire this year, falling more than 6% against the US dollar. However, massive interventions by officials in Tokyo in currency trading appear to have stabilized the yen.

On another note, the Federal Reserve held the federal funds rate at a 23-year high of 5.25%-5.50% for the eighth consecutive meeting in July 2024, in line with expectations. Policymakers indicated that there was some further progress toward the 2% inflation target, although it remains somewhat elevated. Also, recent indicators suggest that US economic activity has continued to expand at a solid pace. Job gains have slowed, and the unemployment rate has risen but remains low. The US central bank judges that the risks to achieving its employment and inflation goals continue to move towards a better balance.

However, the Fed does not expect it to be appropriate to cut rates until it gains greater confidence that inflation is moving sustainably towards 2%. During the regular press conference, Fed Chairman Powell said that a September rate cut could be on the table if inflation falls in line with expectations and that he could imagine scenarios where the Fed could cut rates several times this year or not at all.
 

USD/JPY Technical Analysis and Expectations Today

The general trend for the USD/JPY price has turned bearish as I mentioned before with the break of the 150.00 level and may enter new buying levels from 148.00 and 146.70 respectively. Meanwhile, considering that the announcement of the US jobs numbers tomorrow will have a strong and influential impact on the performance of the currency pair.

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