With the BOJ meeting under way, the market expects USD/JPY to trade between the upper ¥155s and lower ¥156s. At the same time, Governor Ueda Kazuo (植田和男)'s hawkish stance has become a key focus in determining the yen's future direction.
The BOJ's monetary policy meeting decision announcement and Governor Ueda Kazuo (植田和男)'s press conference on the 18th will be the market's main focus. The market sees a 25bp rate hike as almost certain and is watching the pace of additional rate hikes this year and the strength of the Bank's tightening stance.
In the previous day's New York session on the 17th, the yen strengthened for the first time in four trading days against a backdrop of lower oil prices and declines in long-term US Treasury yields. USD/JPY ended trading broadly at 155.90-156.00. A decline in initial US jobless claims and an upside surprise in the Philadelphia Fed Index revived expectations of an additional Federal Reserve rate hike this year.
The BOJ's rate hike decision itself is unlikely to be a surprise, and buying or selling on the fact is expected immediately after the announcement. Market attention has shifted to whether additional rate hikes this year will come once a quarter or once every six months, and how far the Bank will go in discussing monetary tightening.
Some expect the risk of further yen depreciation to rise if Governor Ueda Kazuo (植田和男) does not adopt a hawkish stance, while markets are likely to weigh expectations of a faster pace of rate hikes against arguments for caution. Developments at the US Federal Reserve and fluctuations in oil prices are also factors affecting USD/JPY's direction.