Soon Bank of Japan will be led by someone else. The Japanese Government’s nomination of Kazuo Ueda for the post of BOJ Governo will replace Governor Kuruda in April. Now, the market focuses on how Ueda will steer monetary policy. Most economists believe that Ueda will take a dovish approach. Mr. Ueda’s economic theories, with the dollar’s strength again, helped the scale weigh in favor of the dollar, and USDJPY raised above 135 after touching a multi-month low under 130.
Mr. Ueda is an academic economist and a firm supporter of the central bank’s ultra-dovish monetary policy. Therefore, Ueda will likely not be in a hurry to unwind the BOJ’s ultra-easy policy. Moreover, that was why the Yen has been declining over the past few days. In BoJ’s last meeting, policymakers maintained ultra-low interest rates and kept the central bank’s refinancing rate at -0.10%.
On the economic data front, Q4 2022 final GDP data showed only 0.2% growth, falling short of expectations of 0.5% growth. Also, the Japanese GDP Price Index on an annual basis came out to 1.1% for 2022, mainly due to the high imported energy costs. It is above 3% and slightly more than BoJ’s 2% target on the inflation front. Therefore, the central bank still has room to continue its dovish stance. On Friday, we will have more data on the Japanese inflation condition. In the labor market, wages raise concerns about inflation; however, BoJ has enough tools to control it. Therefore we should not worry too much about that.
Japanese Yen still remains one of the most trusted currencies to hold cash. From the technical point of view, the USDJPY chart remains bullish, with 132 as a pivot, 130 as a key, and psychological support. Above this price, 136.80 is the first resistance, and then we have 139.40.