The Bank of Japan met to vote on monetary policy and ended up voting to keep pace of the record stimulus measures. However, there was a dissent to the majority vote and the result was 8-1. Board member Takahide Kiuchi, BoJ Gov. Haruhiko’s toughest critic, voted for a reduction in the asset-purchase program to 45 trillion yen a year. It is currently at 80 trillion yen a year.
Here’s a link to the official BoJ Statement (PDF): BoJ Statement April 8.
While the dissent was singular, it does start to show that the BoJ is at least unlikely to increase stimulus. The prospect of extension and expansion of stimulus has kept the JPY weak, but the Japanese Yen has been resilient of late, keeping most yen-pairs in consolidation. Today’s BoJ Statement essentially tells us that the stimulus measures will continue, but it is not longer a unanimous opinion to keep it at the current pace. This means, the pressure against the Japanese yen should start to wane, and we have already seen that.
In the short-term, the JPY might become weaker because it looks like stimulus measures will be the same for possibly another year or so. In the medium-term, where monetary policy direction matters more, the JPY is likely to remain resilient. Let’s now turn to the 4H chart.
The USD/JPY pair retreated after a bullish breakout. There was not much of a reaction to the BoJ statement, but there was a slowdown of the decline after the pair fell below 120. Now, if price falls below 119.40, the bullish breakout could be invalidated. A break below 119 would further confirm a bearish continuation in the short-term, with the 118.33 March low in sight, and with risk of extending lower towards a multi-month consolidation support around 115.65-116.
More likely, USD/JPY will be bullish in the short-term. If price holds above 119.40, and rallies back above 120.50, USD/JPY will have the 122.00 high in sight, with risk of extending higher. However, as mentioned above, we should not expect much of an extension because the JPY will likely be relatively resilient in the medium-term.
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