The FOMC and BOJ meetings are scheduled for the same period this week, and USD/JPY is expected to move sharply depending on the FOMC outcome. The direction of dollar buying or selling could change depending on factors including the August CPI.
The Federal Open Market Committee (FOMC) and Bank of Japan (BOJ) are expected to hold their meetings in succession this week. The market is focused on whether rates will be raised, the pace of future rate hikes, the wording of the statement, and the release of the dot plot. Following developments including higher crude oil prices and the PPI reading in the previous week, market reactions are prone to diverge ahead of the CPI release. The August CPI, which will inform the FOMC's decision, is scheduled for release during the night in Japan. If expectations of a rate hike strengthen, a dollar-buying reaction is anticipated.
A 0.25% BOJ rate hike at this meeting is considered almost certain. Whether any BOJ members expressed support for a 0.5% hike could influence subsequent developments. The main focus is expected to be Governor Ueda Kazuo (植田 和男)'s press conference, with the market likely to pay close attention to any indications about the pace of rate hikes through year-end.
In the expected price scenarios, if the FOMC raises rates while Governor Ueda Kazuo (植田 和男) is perceived as relatively dovish, the dollar could strengthen and the yen weaken, with the ¥158 area serving as a potential upper-end guide. Conversely, if the FOMC leaves rates unchanged and Governor Ueda Kazuo (植田 和男) signals an acceleration in the pace of rate hikes, the yen could strengthen. The first focus would be whether USD/JPY breaks below ¥152, and if it does, ¥150 would come into focus. The overlap between the two meetings is expected to produce a wider-than-usual trading range.
Next week's events include the G20 energy meeting on 14 September, the New York Fed Empire State Manufacturing Index on 15 September, FOMC-related indicators and Fed Chair Kevin Warsh's press conference on 16 September, and the BOJ meeting and Governor Ueda Kazuo (植田 和男)'s press conference on 18 September. With these factors coming together, USD/JPY is expected to be highly likely to swing in either direction.