Institutional Analysis: USDJPY in 130-135 or 129-134 range could be the new normal

USDJPY looks set to trade in a lower range after the BOJ adjusts its yield curve control policy. 130-135 or 129-134 ranges could be the norm through 2023, and will need to wait for a clearer assessment of the BoJ’s intentions and future direction before breaking. Just like ignoring the Fed‘s terminal rate expectations, the market is currently choosing to ignore the BOJ’s statement and instead is separately envisioning what the BOJ will do and where rates will go.

Some believe that the BOJ will move to a more assertive stance. But with the Japanese economy currently struggling and the risk of inflation falling back below 2%, all of this seems premature. The dollar to yen could be close to its recent low of 130.58, but could see some bounce.