The Japanese yen is entering a new era after Haruhiko Kuroda departed as the Bank of Japan (BoJ) governor. The USD/JPY price was trading at ~132 on Friday, which was a few points above this week’s low of 130.70. On the other hand, the GBP/JPY was trading at 163.84 while the EUR/JPY is at 144.31.
New era starts at the BoJ
The biggest JPY news is that Haruhiko Kuroda’s term as the Bank of Japan has ended. This is important because Kuroda has been one of the most consequential BoJ governors in decades.
In his tenure, the BoJ has consistently left interest rates at the negative zone in a bid to stimulate inflation. Additionally, the bank implemented a large-scale quantitative easing (QE) program that boosted its balance sheet to over $8 trillion. Japan has a GDP of less than $5 trillion.
To a large extent, the BoJ has been unable to achieve its inflation target. While the headline CPI has moved to over 2%, analysts believe that it will go back lower when energy prices stabilize in the coming months.
Japan’s economic growth has also been underwhelming as the country has lost its market share to some Asian countries. Despite the massive cash printing, the GDP has dropped from over $6 trillion in 2011 to $4.9 trillion.
Therefore, some analysts believe that the new BoJ Governor will continue with Kuroda’s policies for a while and then start tightening.
On Friday, data from Japan showed that the country’s household spending plunged by 2.4% in February. On a year-on-year basis, spending rose by 1.6%. Additional data showed that overall wage income rose by 1.1% while overtime pay jumped by 1.7%. Recently, Japan’s big employers said that they will hike wages for the first time in years.
The USD/JPY price will next react to the upcoming American jobs numbers, which I wrote about here. Economists expect that the labor market slowed in March as concerns about the economy continued.
USD/JPY forecast
USD/JPY chart by TradingView
The 4H chart shows that the USD/JPY exchange rate has been in a downward trend after peaking at 137.93 on March 8. It has dropped by 4.5% from the highest point in March. The pair remains slightly below the 50-period moving average and is slightly above the 38.2% Fibonacci Retracement level.
Therefore, the outlook of the USD to JPY pair is bearish, with the next reference level to watch being 129.70, the lowest point on March 24.
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