The head of the Bank of Japan, Haruhiko Kuroda, talked about monetary policy during the World Economic Forum in Davos, although his rhetoric remains unchanged:
-
Japan has not yet reached a stable 2% long-term inflation target
-
Inflation will start to fall below 2% from February, which is why the BoJ does not decide to change its policy
-
The labor market is tight, wages will start to grow, which will allow to stabilize inflation
-
Kuroda emphasizes that his policies have saved Japan from sharp deflation
-
The last decision to increase the fluctuation range for 10-year bond yields was not a mistake, it was related to the proper functioning of the debt market
As one can notice, no changes in the BoJ's policy are expected in the near future, unless the market forces the central bank to do so by significantly exceeding the yield on 10-year bonds, or significantly exceeding the lower tenor yield. It is worth noting, however, that Kuroda predicts wage increases, which may suggest that sooner or later, (most likely after leaving his post in April), BoJ policy may be adjusted.
Start investing today or test a free demo
Create account Try a demo Download mobile app Download mobile appWe are currently seeing a significant weakening of the yen against other major currencies. However, the Fed's opinion on the future of monetary policy will also play a significant role. The Fed is starting to notice a sharp slowdown of the economy. Braindard suggests the Fed will have to assess what "damage" has been done by the recent hikes. Of course, Brainard is known for her dovish stance, but it cannot be ruled out that Fed hikes will reach 5% (although some suggest only 25 bp and a hold). If the Fed makes a turnaround in February or March, USDJPY may resume a downward move.
USDJPY broke above 130.00 and if current sentiment prevails upward move may accelerate towards upper limit of the descending channel. On the other hand, downward pressure related to the US dollar may appear in the near future. Source: xStation5
The content of this report has been created by XTB S.A., with its registered office in Warsaw, at Prosta 67, 00-838 Warsaw, Poland, (KRS number 0000217580) and supervised by Polish Supervision Authority ( No. DDM-M-4021-57-1/2005). This material is a marketing communication within the meaning of Art. 24 (3) of Directive 2014/65/EU of the European Parliament and of the Council of 15 May 2014 on markets in financial instruments and amending Directive 2002/92/EC and Directive 2011/61/EU (MiFID II). Marketing communication is not an investment recommendation or information recommending or suggesting an investment strategy within the meaning of Regulation (EU) No 596/2014 of the European Parliament and of the Council of 16 April 2014 on market abuse (market abuse regulation) and repealing Directive 2003/6/EC of the European Parliament and of the Council and Commission Directives 2003/124/EC, 2003/125/EC and 2004/72/EC and Commission Delegated Regulation (EU) 2016/958 of 9 March 2016 supplementing Regulation (EU) No 596/2014 of the European Parliament and of the Council with regard to regulatory technical standards for the technical arrangements for objective presentation of investment recommendations or other information recommending or suggesting an investment strategy and for disclosure of particular interests or indications of conflicts of interest or any other advice, including in the area of investment advisory, within the meaning of the Trading in Financial Instruments Act of 29 July 2005 (i.e. Journal of Laws 2019, item 875, as amended). The marketing communication is prepared with the highest diligence, objectivity, presents the facts known to the author on the date of preparation and is devoid of any evaluation elements. The marketing communication is prepared without considering the client’s needs, his individual financial situation and does not present any investment strategy in any way. The marketing communication does not constitute an offer of sale, offering, subscription, invitation to purchase, advertisement or promotion of any financial instruments. XTB S.A. is not liable for any client’s actions or omissions, in particular for the acquisition or disposal of financial instruments, undertaken on the basis of the information contained in this marketing communication. In the event that the marketing communication contains any information about any results regarding the financial instruments indicated therein, these do not constitute any guarantee or forecast regarding the future results.
