Nominee for Governor of the Bank of Japan made by the Japanese Prime Minister
A Top-Level Change
It is the first time in ten years that the Bank of Japan (BOJ) has had a new governor chosen by the Japanese Prime Minister, Fumio Kishida. Haruhiko Kuroda, the current governor, has been in office since March 2013 and will retire in April 2023.
Interest rates are still unchanged.
The BOJ has not raised interest rates despite being one of the G10 central bankers, and its Policy Balance Rate has remained at minus 0.10% since 2016.
Continued or Changed Policy
In contrast to an appointment from outside the present government, which would signify a change in policy, the appointment of a new governor from inside the current administration signifies the continuation of the current dovish stance.
January US inflation data
Bringing down Inflation
Inflation in the US is expected to have moderated in January from the 6.5% increase reported in December to 6.2%. With the headline Consumer Price Index reading of 6.2% being much lower than the 9.1% observed in June, this may support the notion that disinflation is beginning to take root in the US economy.
Fed rate increases
Given that its benchmark rates have already grown by 450 basis points since the first quarter of 2022, this may cause the Fed to pause its rate rises.
Conditions both bullish and bearish
Bullish
Currency strength would arise from the Fed raising US interest rates after the 5.15% high that the market has predicted. Additionally, the selection of a BOJ Governor who is equally dovish, like Masayoshi Amamiya or Masazumi Wakatabe, might cause the Japanese Yen to decline even more and boost USDJPY right away.
Bearish
A CPI below 6.2% would indicate that the Fed’s aggressive rate increases are slowing down US inflation, which would cause a stop in rate increases and a decrease in the US Dollar’s gains. A change in the BOJ’s policy position and a reassertion of the Japanese Yen might be indicated by the nomination of a new BOJ Governor who is hawkish, such as Hiroshi Nakaso or Hirohide Yamaguchi.
Forex Market Analysis
Resistance
Resistance is anticipated to be found between 133.62 and 134.77 in the area surrounding the psychologically significant 134.0 level, which has served as support-turned-resistance in the December-January timeframe.
Support
There is a 70% likelihood that USDJPY will move between 127.1 and 133.7 during the upcoming week, according to Bloomberg’s FX model.