Home USD/JPY Outlook: Probability of Future Exit From BoJ’s Ultra-loose Policy

USD/JPY Outlook: Probability of Future Exit From BoJ’s Ultra-loose Policy

  • Kuroda opened the door to the possibility of a shift from an ultra-loose policy.
  • Kuroda dismissed the possibility of a short-term interest rate increase.
  • The BoJ will continue supporting the economy to boost wage growth.

Today’s USD/JPY outlook is bearish as investors start seeing an end to BoJ’s easy policy. Haruhiko Kuroda, governor of the Bank of Japan (BOJ), stated on Thursday that any future discussion on ending the ultra-loose monetary policy would focus on how quickly short-term interest rates rise and how the bank adjusts its enormous balance sheet.

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Kuroda dismissed the possibility of a short-term interest rate increase and emphasised that the BOJ must continue to support a sluggish economic recovery with loose monetary policy.

But he added that once the BOJ’s 2% inflation objective, supported by wage hikes, is in sight, the BOJ can discuss a plan of action for ending its enormous stimulus program and moving toward policy normalisation.

“It’s premature to lay out details of an exit strategy. But one major factor of debate will be the pace of increase in the BOJ’s short-term policy rate, now set at -0.1%,” Kuroda told parliament.

Although the future was still somewhat unclear, Kuroda said wages would likely grow in the coming years as businesses adapt to increasing labour shortages and current living expenses.

“It’s extremely important for the BOJ to underpin the economy with ultra-loose monetary policy and ensure the necessary environment is falling into place for companies to hike wages,” Kuroda said.

USD/JPY key events today

Investors await the US inflation report, which will probably cause a lot of volatility as it will show whether the Fed is achieving its objective of lowering inflation. There will also be an initial jobless claims report from the US.

USD/JPY technical outlook: Slow descent with the next target at 145.01

Usd/jpy outlook

Looking at the 4-hour chart, we see the price trading below the 30-SMA and the RSI below 50. The bears are in control of the current move. However, the price is trading in a tight range, with the 30-SMA offering resistance and the 146.02 key level support.

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If the bearish trend continues, the price will break below 146.02 and head to 145.01. However, if bulls gather enough momentum to push above the 30-SMA, it will indicate a shift in sentiment to bullish and could mean higher prices. The bearish bias remains as long as the price trades below the SMA.

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Saqib Iqbal

Saqib Iqbal

Saqib Iqbal is a market analyst, prop fund trader and mentor, serving the industry with his analysis and educational content since 2011. The author has great exposure to different financial markets and institutions. He's well-known for his day trading reviews and multiple timeframe analysis.