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

The Bank of Japan (BOJ) will release its latest monetary policy meeting decision approximately at 2:00 GMT on Tuesday. Even if the central bank is widely expected not to announce any changes in its key policy actions by holding short-term interest rate target at -0.1% and keep directing 10-year government bond yields toward zero, quarterly economic outlook increases the importance of the event.

Additionally, the BOJ Governor Haruhiko Kuroda speaks at the press conference somewhere near 06:00 GMT and will be closely observed to seek clues of how the central banker showcases the upcoming tax hike in October.

Ahead of the event, TD Securities said,

The BoJ has sounded more dovish of late, highlighting downside risks from weaker external demand while keeping their options open to further easing should the economy lose momentum. So far that has not been the case, with data over recent weeks such as industrial production, holding up well although there has been some softening in the Tankan. We expect the BOJ to refrain from any major policy tweaks though we do see the risk that it strengthens forward guidance/JGB flexibility. We reject additional rate cuts as that has been a widely unpopular policy implementation.

How could it affect the USD/JPY?

With the recent recovery in Japanese data confronting brighter chances of extended easy money policy and additional economic pressure due to expected sales tax hike from October, the BOJ’s downbeat statement, sluggish economic outlook and/or dovish comments from the Governor can add weakness to the Japanese Yen (JPY). However, JPY’s safe-haven appeal could restrict the quote’s upside amid persistent fears ahead of the key events like US-China trade talks and the Fed meeting.

On the technical front, the USD/JPY pair needs a successful break beyond 109.00, encompassing current month top and mid-month bottom, in order to aim for 100-day exponential moving average (EMA) level of 109.28, failing to which can drag the quote back to July 23 high around 108.30.

Key Notes

USD/JPY approaches 109.00 as Yen tumbles

USD/JPY Analysis: poised to challenge the 109.00 high

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.