The Bank of Japan (BoJ) has ended its eight-year negative interest rate period, causing USD/JPY to rise above 150.00 post-decision. Analysts at ING delve into the Yen’s future.
Underwhelming Lift-off for BoJ
Negative interest rates, yield curve control, ETFs, and Real Estate Investment Trusts purchases are now part of BoJ’s history. Instead, excess reserves at the BoJ will earn 0.10% interest, and the BoJ will aim for the overnight call rate (now its primary policy rate) within a range of 0.0%-0.1%.
The Yen weakened as news broke that the BoJ plans to maintain an accommodative policy stance for the foreseeable future. However, recent reports suggest that further rate hikes could be on the horizon now that the correlation between wages and prices has been confirmed.
Yet, the Yen faces a challenge due to persistently low volatility and the enduring popularity of the carry trade. USD/JPY will likely trade within a range of 150.00-152.00 for now (Tokyo locals believe the BoJ won’t intervene to sell USD/JPY until it reaches 155.00), and any potential decline in USD/JPY will likely originate from the Dollar’s side.
