USD/JPY Bullish Again on Expected BOJ Monetary Policy Normalization: $150 Next?
The last BOJ meeting of 2023 took place before the holidays in December, and as expected, it brought no changes to the dovish BOJ monetary policy that has been in place for many years.
The accompanying statement was interpreted as a continuation of the current policy, especially with the governor's assertion that the Central Bank would not rush to change the current approach.
April is currently mentioned in the public space as a potential start date for the rate-hike cycle, but this has not been confirmed through official channels.
Meanwhile, in the absence of hawkish declarations, the Japanese yen remains under selling pressure, evident in pairs like USD/JPY, which has the potential to return above 150 yen per dollar.
Investors hoping for more detailed information on the exit strategy from the dovish monetary policy after the last BOJ meeting of the previous year may be disappointed.
The BOJ maintains the current status quo, and even if a rate-hike cycle is initiated, it will be extremely cautious, with a pace of one or two hikes per year to reach a level of 0.5% over the next four years.
This is the scenario outlined by Makoto Sakurai, a former BOJ board member from 2016 to 2021.
Meanwhile, the OECD is calling for monetary policy normalization in Japan when inflation hovers around the 2% target.
Normalization is expected to include a gradual increase in interest rates and the flexibility of yield curve control, especially for Japan 10-Year government bonds.
However, the Bank of Japan does not need to hurry, especially in the face of the upcoming pivots by the Fed and ECB in the coming months, which may reduce pressure on bond yields globally.
The next inflation projection in Japan by the Bank of Japan will be on
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