USD/JPY Bears Lose Momentum: Could Uptrend Resume With 160 in Sight?
The USD/JPY currency pair is undergoing a correction in its long-term upward trend, primarily fueled by the periodic weakness of the US dollar due to disinflation and a potential Fed pivot in May.
Meanwhile, Japan's inflation appears to be stabilizing around 3%, a factor that might not be compelling enough for the Bank of Japan (BOJ) to shift away from its ultra-loose monetary policy.
A recently published commentary by BOJ board member Seiji Adachi indicates a continuation of the ultra-loose monetary policy, suggesting that the ongoing move might be a mere unwinding of the previous upward trend.
Battling deflation has been a persistent challenge for the Bank of Japan since the late 20th century. The current strategy involves maintaining negative interest rates and controlling the yield curve on government bonds to stimulate inflation.
Although year-on-year consumer inflation presently stands at 3.3%, slightly above the target, it has stabilized since March after a decline from 4.2%.
Moreover, the latest core inflation reading for October, at 2.9%, fell below the forecasted 3.4%.
Considering the challenge of sustaining moderate inflation in the long term, the BOJ is likely to persist in its current approach, with potential adjustments such as the recent easing of yield curve control conditions.
This determination is reinforced by a statement from Seiji Adachi, dismissing the notion that Governor Ueda intends to deviate from the current policy under the existing macroeconomic conditions.
Yesterday, GDP data from the U.S. was released in the form of revised figures for Q3 of the current year. The readings confirmed the strength of the U.S. economy with 5.2% YoY (annualized data) thus placing it above forecasts of 4.9%
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