**Japanese Yen Weekly Forecast: Will USD/JPY Break 155? Key Focus on Elections and Bank of Japan Policy**
*Original Author: Bob Mason | Source: FXEmpire*
The Japanese Yen continues to face substantial pressure amid mounting expectations that the Bank of Japan (BoJ) will maintain its ultra-loose monetary policy in contrast to the U.S. Federal Reserve’s hawkish stance. As the USD/JPY nears the critical 155 level, traders and investors are closely watching the currency pair for signs of potential intervention or policy shifts that could reshape the current trajectory.
This article offers a comprehensive weekly forecast for the Japanese Yen, delving into the economic events, monetary policy expectations, and political factors that might drive USD/JPY movements in the coming days.
## Key Highlights
– USD/JPY inching closer to the 155 resistance level amid diverging monetary policy pathways between the U.S. and Japan.
– Japan’s inflation data, consumer spending figures, and political developments are creating added pressure on the Yen.
– U.S. economic data, including PCE inflation and GDP growth, will heavily influence expectations for Federal Reserve policy and drive broader USD strength.
– Speculation about Japanese intervention is escalating as the Yen weakens to levels previously associated with direct central bank action.
## Japanese Yen Under Continuing Pressure
The Yen’s persistent weakness against the U.S. Dollar is underpinned by diverging central bank policies. While the U.S. Federal Reserve continues to signal that interest rates may remain higher for longer to manage inflation, the BoJ is keeping policy extremely accommodative, with short-term interest rates still near or below zero.
In the last week, the USD/JPY advanced above the 154 level, its highest since 1990. Traders are increasingly concerned that if the 155 mark is breached, Japanese authorities could be prompted to intervene in the foreign exchange markets.
## Economic Indicators from Japan
A number of domestic indicators from Japan are contributing to weakness in the Yen, especially within the inflation and consumer spending categories.
### Inflation Trends
– Japan’s annual headline inflation rate showed modest acceleration in March, driven partly by rising energy prices and adjustments in government utility subsidies.
– Despite this uptick, underlying inflation remains relatively subdued compared to Western economies, giving the BoJ little incentive to begin a sustained tightening of policy.
– The BoJ’s preferred core inflation metric, which excludes fresh food and energy, also continues to hover around the 2% mark — its stated target — but shows signs of stagnation.
### Household Spending
– Recent data shows a concerning decline in household spending, emphasizing the fragility of the domestic consumer base.
– Real wages have remained in negative territory, chipping away at consumer confidence and purchasing capacity.
– Household spending contracted for the 12th consecutive month in year-over-year terms, demonstrating limited support for inflation from the demand side.
These factors contribute to the central bank’s ongoing caution about hiking rates too quickly, lest it harm Japan’s still-recovering economy.
## Bank of Japan Policy Outlook
– Although the BoJ ended its negative interest rate policy in March 2024, its overall policy stance remains highly accommodative.
– Policymakers remain focused on achieving a sustained wage and price increase environment before considering significant tightening.
– Market participants had anticipated that the BoJ might follow its March rate hike with additional tightening in the coming months, but this expectation is now fading due to softening data.
Looking ahead, the BoJ’s upcoming monetary policy meeting will be critical. Traders will scrutinize any rhetoric from Governor Kazuo Ueda for clues about future policy actions.
## Risk of FX Intervention
There is growing speculation that Japanese authorities could intervene in the foreign exchange market if the Yen continues to depreciate rapidly.
– The Ministry of Finance (MoF), in collaboration with the BoJ, has a track record of stepping into the market to support the Yen when it crosses psychologically and politically sensitive levels.
– In 2022
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