Yen forecast: No-surprises BoJ meeting sends USDJPY to 148

BoJ sticks to loose monetary policy, USDJPY breaks above 148

The Japanese yen (USD/JPY) declined further on Friday, falling below 148 per dollar and returning to levels seen nearly a year ago. The drop ensued after the Bank of Japan (BoJ) decided to maintain its ultra-loose monetary policy, which aims to achieving a sustainable 2% inflation target. This decision dashed hopes that the central bank would provide indications of a potential end to its negative interest rates policy.

Furthermore, Japan's Finance Minister, Shunichi Suzuki, emphasized that he would not rule out any options on currencies and warned against significant yen weakness that could negatively impact the economy.

Japan carried out interventions in the currency market in both September and October of last year, and these actions had specific impacts on the foreign exchange market. He emphasized that he would be open to considering various options if currency volatility were to reach extreme levels.

"We are closely watching currencies with a high sense of urgency," Suzuki told reporters on Friday.

Markets.com Chief Markets Analyst Neil Wilson weighed in on the BoJ meeting in his morning note, saying there may be cause for concern for the yen going forward:

In terms of economic data, Japan's headline inflation rate decelerated to 3.2% in August from the previous month's 3.3%, while the core inflation rate remained above the Bank of Japan's 2% target for the seventeenth consecutive month. Business activity in the country declined to a seven-month low in September.

At the time of writing, USDJPY was trading at 148.27, up 0.47% on the day.

Yen forecast: Analysts say yen to weaken vs. USD

In a comment cited by FXStreet, economists at TD Securities said the USD/JPY exchange rate would likely break above the 150 mark in the near future:

Analysts at Societe Generale were also bearish on the pair in their USDJPY forecast:

Prior to the BoJ meeting, ING’s Global Head of Markets, Chris Turner, wrote that the yen to dollar rate would be “on the front line” of the dollar’s increasing strength, with the BoJ likely to intervene around the 150 mark:

In their latest FX Snapshot on September 18, analysts at Citibank Hong Kong said:

Citi’s 3-month Japanese yen forecast saw the USD/JPY exchange rate trading a potential average of 148, which could improve to 130 in 6 to 12 months’ time, according to the bank. Citi’s long-term AUD forecast was similarly bullish, projecting the AUD/USD pair to trade at a potential average of 130.

The USD/JPY forecast from Australian bank Westpac, last updated on September 22, was surprisingly bullish on the Japanese currency, and saw the pair potentially trading at 144 in December 2023, 142 in March 2024, and 140 in June 2024. The bank sees the dollar to yen rate at 136 in December next year.

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