When is the BOJ rate decision and how could it affect USD/JPY?

Early on Tuesday, around 03:00 AM GMT, the Bank of Japan (BOJ) will provide the decision of its routine monetary policy meeting. Following the rate decision, BOJ Governor Haruhiko Kuroda will attend the press conference, around 06:00 AM GMT, to convey the logic behind the latest policy moves.

Following the alteration in the BOJ’s ETF allocation, the Japanese central bank is widely expected to keep the short-term interest rate target at -0.1% while directing 10-year Japanese Government Bond (JGB) yields toward zero.

It should, however, be noted that the presence of the first quarter (Q1) Outlook Report, to be published with the rate decision, increases the importance of today’s BOJ for the USD/JPY traders.

Ahead of the event, TD Securities said,

This meeting is likely to be uneventful, with the BoJ likely to keep policy settings unchanged. At its March meeting, the BoJ announced various tweaks to policy following a long-awaited review. Nonetheless, growth risks have increased, with the third state of emergency issued in Tokyo for two weeks, leading to fears of a double-dip recession. As such BoJ will likely sound cautious on domestic demand, potentially making some, albeit small changes to its growth outlook.

On the same line, Westpac mentioned,

The Bank of Japan announces its monetary policy decision today (no fixed time). No policy change is expected, with the focus instead on quarterly forecasts. Newswires note that the forecasts should confirm that the bank doesn’t expect inflation to reach the 2% target before Governor Kuroda’s term ends in April 2023.

How could it affect the USD/JPY?

USD/JPY prints mild gains, up 0.15% intraday to 108.25, while cheering the US dollar weakness ahead of the event. It’s worth mentioning that the risk catalysts are mixed with Japan’s Nikkei 225 down 0.10%, in contrast to the S&P 500 Futures’ 0.05% intraday uptick.

Although the BOJ isn’t expected to alter its monetary policy, the USD/JPY traders will look for brighter spots in the economic outlook to extend the latest upside momentum. However, recent emergencies in Tokyo and surrounding three prefectures should be kept in mind while reading the central bank’s upbeat forecasts.

Meanwhile, the coronavirus (COVID-19) woes and challenges for US President Joe Biden’s $2.25 trillion infrastructure spending are likely catalysts that can test the post-BOJ moves of USD/JPY and hence need traders’ attention.

Key notes

USD/JPY drops back towards 108.00 ahead of BOJ 

USD/JPY Forecast: Bears paused but retain control

About BoJ Rate Decision

BoJ Interest Rate Decision is announced by the Bank of Japan. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and rises the interest rates it is positive, or bullish, for the JPY. Likewise, if the BoJ has a dovish view on the Japanese economy and keeps the ongoing interest rate, or cuts the interest rate it is negative, or bearish.