Yen sharpens decline to two-week trough as the BoJ meeting commences

Yen declined in European trade on Monday against a basket of major rivals, extending gains against the dollar for the fifth straight session and plumbing a two-week trough as the Bank of Japan’s policy meeting commences. 

Following the recent Japanese wages negotiations, which led to a surge in average wages, speculations rose that the BOJ will soon announce an end to negative rates. 

The BOJ is expected to raise interest rates for the first time in 17 years either this week or in April and start policy normalization. 

USD/JPY

USD/JPY rose 0.3% to 149.33, the highest since March 3, with a session-low at 148.90, after closing 0.5% on Friday, the fourth loss in a row as US treasury yields rose.

Yen fell 1.3% last week against the dollar, the first weekly loss in three weeks on speculation that the Federal Reserve will maintain interest rates at high levels for an extended duration. 

BOJ

Today the Bank of Japan is holding its two-day policy meeting with decisions expected tomorrow. 

There’s a 39% chance that the BOJ will raise interest rates this year, and a 60% chance it will cancel its control of government bond yields. 

Reuters reported that the BOJ is seriously preparing to exit current ultra easy monetary policies since Kazuo Ueda took his post as the new BOJ governor in late 2023. 

It’s expected the BOJ will raise rates to zero percent by April following wages negotiations that led average wages to surge to 33% year highs. 

However, it’s still expected to keep purchasing government bonds and maintain its overall supportive monetary structure of the economy.