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  • Haruhiko Kuroda warned investors of Japan’s worsening economic outlook.
  • The BOJ will not raise rates until it sees higher wage growth.
  • The price is at a critical resistance level on the charts.

Today’s USD/JPY forecast is bullish as the Bank of Japan plans to retain its relaxed monetary policy. There are darker days ahead for the yen. The Bank of Japan remains unsawed by the current wave of rate hikes globally, aiming to control inflation.

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On Monday, Bank of Japan governor Haruhiko Kuroda warned the markets of uncertainty in Japan’s economic outlook. He said the central bank would be ready to scale up stimulus to support the weak economy.

“Uncertainty regarding Japan’s economy is very high given risks such as the COVID-19 pandemic’s impact, the Ukraine crisis, and rising commodity costs,” Kuroda said.

The central bank’s stand on inflation, however, remains unchanged. Kuroda insists the current spike in inflation is mainly ‘cost-push’ and, therefore, temporary. He sees no need to raise interest rates when inflation is driven by rising fuel costs that will go down in time.

Only one thing will push the central bank to follow in the path of other major central banks; rising wage growth. It will signify that inflation is becoming entrenched in the labor market and the broader economy. Until then, the BOJ will sit on its hands and watch other central banks scramble to try and control inflation.

Japan’s ruling coalition won 63 seats, up from 55 in Monday’s election, but showed no change in the ultra-easy monetary policy, which saw the USD/JPY rally.

USD/JPY key events today

USD/JPY investors do not expect to receive significant news releases from Japan today. There will be a speech from FOMC member Williams that might give monetary policy clues.

USD/JPY technical forecast: Bulls hit a new high

USD/JPY forecast

The 4-hour chart shows the price in a strong bullish move. The price is trading well above the 30-SMA, showing a steep trend, and the RSI is nearing oversold territory, favoring bullish momentum. The price is currently trading around the June 29 high at 137.016. This strong resistance level pushed the price lower in June and might do so again.

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If bulls can maintain their momentum, we might see the price breaking above this level and heading higher. However, the price might retest the July 5 resistance at 136.262 before continuing its bullish move.

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