CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Please ensure you fully understand the risks involved.

Bank of Japan (BOJ) preview: Monetary policy to hold steady

The Bank of Japan meeting cuts across July 14-15, expecting no changes to monetary policy while the USD/JPY pair may find the broad risk sentiment a more pertinent driver this week.

Bank of Japan to hold steady through 2020

Despite the BoJ’s latest quarterly regional report that saw assessment across all nine of Japan’s economic region deteriorate, the central bank is expected to hold monetary policy unchanged through to the end of the year. This will include a policy rate at -0.10% amid the negative interest rate policy regime and yield curve control whereby JGBs yield will target at around 0.00%. This comes after a series of measures that the BoJ had put into place to tackle Covid-19 since the global pandemic’s descent upon the Japanese economy.

In the recent June meeting the BoJ had notably brought forth an increase in the estimation of the overall virus package to 110 trillion from the 75 trillion that had been previously projected. Although a technical amendment, it is widely seen as the last major change before the BoJ embark on a wait-and-see mode into Q3. Limits of monetary policy play a big part here, but the BoJ is also expecting gradual recovery into the second half of the year. Nascent signs of recovery had been noted across May and some early June data, although Japan had also seen an increase in Covid-19 cases into July. The central bank will be issuing their outlook report alongside the meeting conclusion, with little expectations of any significant revisions here other than GDP which currently sits at -5.0 to -3.0% against the -4.9% median market consensus surveyed by Bloomberg.

USD/JPY may sustain sideway trade

Absent any surprises from the Bank of Japan, the Japanese yen is expected to continue looking outwards for leads. US Q2 earnings season commencement will be one to watch, but between the improving economic data and Covid-19 case growth, the side-way trade could sustain for USD/JPY. Yield differentials had been kept relatively steady judging from that between US and Japanese 10-year government bonds. Immediate support seen at $106.65 while resistance comes in towards the $108 handle, to keep USD/JPY contained in the near to medium term.

This information has been prepared by IG, a trading name of IG Australia Pty Ltd. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients.

See an opportunity to trade?

Go long or short on more than 17,000 markets with IG.

Trade CFDs on our award-winning platform, with low spreads on indices, shares, commodities and more.

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

See more forex live prices


See more shares live prices


See more indices live prices

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.