USD/JPY EXTENDS UPSIDE TO 149.00 AS FOCUS SHIFTS TO BOJ, FED POLICY

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  • USD/JPY jumps to 148.80 on hopes that the BoJ will maintain its ultra-loose monetary policy stance on Tuesday.
  • The BoJ lacks a significant wage-price spiral to back an exit to negative interest rates.
  • Diminished Fed rate cut expectations keep the US Dollar strong near its three-week highs around 103.50.

The USD/JPY climbs to 148.80 in the late European session on Friday as the Japanese Yen weakens on expectations that the Bank of Japan (BoJ) will not end the expansionary policy stance in the meeting on Tuesday.

Plenty of fundamentals favor the BoJ quitting negative interest rates. BoJ’s favourite inflation measure, the Consumer Price Index (CPI), excl. fresh food has remained above the 2% target for a longer period. Meanwhile, Japan's biggest companies agreed with labor unions to raise wages by the highest level in 33 years, reported Reuters.

In addition, Japan's Finance Minister Shunichi Suzuki said early Friday that the economy is no longer in deflation and that the government will mobilize all policy steps available to continue the strong trend of wage hikes this year. However, investors hope the BoJ will not go for exiting the prolonged expansionary policy stance as a full-proof plan for the wage-price spiral remains absent.

Market participants will keenly focus on the BoJ’s press conference about when the central bank will scrap its negative interest rates and Yield Curve Control (YCC). Earlier, BoJ Governor Kazuo Ueda said policymakers will debate whether the outlook is bright enough to phase out the massive monetary stimulus.


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