Growth Forecasts Cut
The Japanese Yen has come under a little selling pressure across the European morning on Friday following the July BOJ meeting overnight. The meeting was largely muted with the BOJ maintaining its headline monetary policy level at current levels. However, the meeting was seen as a net-negative for JPY with the bank revising lower its growth forecast for the current fiscal year. The BOJ now projects the economy to grow at 3.8%, down from the 4% projected prior.
Inflation Forecasts Lifted
While growth forecasts were revised lower, however, there were some positive developments with the bank revising its inflation forecasts higher. The BOJ now projects inflation to hit 2.7% by March 2023, up from 2.4% prior.
New Green Fund Launching
Along with the changes to the bank’s forecasts, it also announced the start of a new investment fund aimed at tackling climate change. The bank’s new green-fund, which will launch later this year, will help support the government’s effort of reaching carbon neutrality by 2050. As part of the operations, the scheme will offer zero percent “green loans” aimed at helping support businesses working towards a healthier climate.
Monetary Policy Divergence Growing in G10
In all, the meeting was largely a non-event. However, given the more hawkish shift happening elsewhere in the G10 space, the BOJ’s reaffirmed commitment to maintaining an easing presence in the market creates plenty of scope for JPY downside against other currencies in the coming months. For now, JPY is retaining a health level of safe haven support, given the residual risks around the pandemic. However, if conditions improve over the remainder of the year, this dynamic could shift dramatically.
Technical Views
USDJPY
The recent sell off in USDJPY has seen the market breaking down through the rising trend line from YTD lows as well as the 110.92 level. For now, price is sitting on support at the 109.63 level. With MACD bearish however, there is room for a further drop lower. Should price slip below this level, focus will shift to support at the 107.91 level next.
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.