The low earlier hit 146.97 on BOJ governor Ueda's press conference but the pair is now trading near 147.85 on the day. Besides a move higher in bond yields, there's not much else driving the rebound in USD/JPY. The earlier dip is largely driven by flows in the heat of the moment, as Ueda did change up his tone today.
In the bigger picture though, USD/JPY looks to be moving back up as traders reconsider a break under the 100-day moving average (red line) at 147.50. That remains the key technical level to watch in the sessions ahead, in making sense of the price momentum in the pair.
As for the BOJ today, what exactly is the takeaway for traders?
No policy change as expected
The central bank leaving policy unchanged was widely expected, even more so after the earthquakes in Western Japan. They chose to maintain the status quo, making it a consistent message that they are waiting on the spring wage negotiations before pursuing any action. So, there wasn't much to really scrutinise on this I would say.
Ueda with a bolder message in the press conference
You can already sense a different tone from Ueda today just by the headlines alone:
- BOJ governor Ueda: Likelihood of achieving 2% inflation target is gradually rising
- BOJ's Ueda says have heard encouraging comments from big firms on wage hikes
- Our confidence has grown in the achievement of price target - Ueda
- BOJ's Ueda: More firms have decided on wage hikes this year compared to last year
It certainly looks like he is teeing up a potential policy change in the months ahead, with April being the likely pivot point. Policymakers have kept alluding to the results of the spring wage negotiations before making any moves and that is what markets are anticipating right now.
All that being said, do remember that all of this talk was supposed to be narrative for the BOJ last year already. Instead, here we are talking about finally reaching that last step one year later. Ueda's remarks today certainly lays out the groundwork for that but will the central bank really follow through?
They have a knack for disappointing markets on many occasions over the last one year and I fear that they might have an excuse to do so again in the months ahead.
If the price action in the Japanese yen today is any indication, it is that traders are growing tired of getting bluffed by the BOJ at this stage.