**USD/JPY Forecast: Yen Slide Continues on BoJ Policy, Fed Outlook, and Global Economic Factors**
*Adapted and expanded from the original article by Mitrade News Team*
The Japanese yen has continued its descent against the US dollar in recent months, with the USD/JPY pair reaching new highs not seen in decades. The ongoing divergence in monetary policy between the Bank of Japan (BoJ) and the Federal Reserve, coupled with evolving global economic conditions, is pushing the pair toward a sustained bullish trend. USD/JPY remains firmly positioned above the 143.00 threshold, and strategies anticipating persistent weakness in the yen are dominating the FX market.
This article explores the current outlook for the USD/JPY currency pair, examining central bank policy dynamics, macroeconomic indicators, and key technical levels. It also includes insights based on other reputable sources to enrich the analysis.
## Key Drivers Behind the USD/JPY Rally
There are several factors currently influencing the surge in the USD/JPY exchange rate:
### 1. BoJ’s Policy Stance Remains Ultra-Dovish
– The Bank of Japan (BoJ) has consistently maintained ultra-loose monetary policy, deviating sharply from many other major central banks that have adopted aggressive interest rate hikes to combat inflation.
– As of early 2024, the BoJ continues to maintain negative interest rates and yield curve control (YCC), although there are signs of potential policy shifts later in the year.
– Governor Kazuo Ueda emphasized the ongoing need for accommodative policy due to Japan’s still-subdued inflation and moderate wage growth.
– The central bank revised inflation expectations slightly upward in January, but remains cautious about declaring victory over deflation, a long-standing issue in Japan.
### 2. U.S. Federal Reserve’s Hawkish Slant
– In contrast, the U.S. Federal Reserve has maintained a hawkish rhetoric, although it has paused on rate hikes recently.
– U.S. interest rates stand at their highest levels in over two decades, with the federal funds target rate between 5.25% and 5.50% as of June 2024.
– Fed Chair Jerome Powell has reiterated the Fed’s commitment to bringing inflation back to the 2% target.
– Although markets are expecting the central bank to begin easing later in the year due to signs of disinflation and slower economic growth, the Fed is not in a rush to reduce interest rates.
– This policy divergence continues to widen the yield gap between U.S. Treasuries and Japanese government bonds, increasing demand for the U.S. dollar versus the yen.
### 3. Carry Trade Momentum
– The wide interest rate differential between the two countries has made USD/JPY a favored pair for carry trade strategies.
– In carry trades, investors borrow in a low-yield currency (like the yen) and invest in a higher-yielding currency (such as the U.S. dollar or Australian dollar).
– The persistently low Japanese rates make funding costs minimal for speculators, thereby sustaining upward pressure on the USD/JPY pair.
### 4. Japan’s Economic Uncertainty
– Japan’s economy has experienced modest growth, registering a contraction of 0.4% in Q1 2024.
– Despite a slight recovery in inflation, domestic demand and wage growth remain constrained.
– Consumer spending has not fully recovered to pre-pandemic levels. Real wages have still not increased significantly enough to support more assertive inflation or economic expansion.
– BoJ’s cautious stance reflects these underlying weaknesses in the Japanese economy, which in turn supports a weaker JPY.
### 5. Interventions by Authorities
– The Japanese Ministry of Finance (MoF) and the BoJ have historically intervened in FX markets when the yen weakens excessively.
– In 2022, the BoJ intervened several times when USD/JPY neared and surpassed 150.00.
– Although speculation about renewed interventions persists
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