ForexLive Asia-Pacific FX news wrap: BOJ policy left unchanged, JPY weakened

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The
focal point for the day in Asia was the final Statement from the Bank
of Japan for 2023. As was widely expected the Bank left its main
policy planks unchanged:</p><ul><li>maintained
its
short-term interest rate target at -0.1%</li><li>the
10-year
JGB yield target was
left around
0%, with the
1%
upper reference rate ceiling
kept
unchanged (the
previously rigid 1% percent ceiling was made a "reference"
point at the October meeting)</li><li>the
YCC
decision was
unanimous</li><li>the
Bank made no
change to forward guidance</li></ul><p>There
is more in the bullets above. The immediate impact was a sharp
weakening in the yen, with yen crosses all higher. USD/JPY jumped
from around 142.60 to 143.40 and then ticked a little higher to just
above 143.75.
</p><p>Still
to come is Bank of Japan Governor Ueda’s press conference where his
words will be scrutinised for clues on the expected timing of the
pivot from the Bank. Speculation has already begun that this could
come as early as January although the April meeting is the front-runner for now.
</p><p>Also
on the docket today were the Minutes of the December Reserve Bank of
Australia meeting. It appears to me that the Bank is completely lost,
with the Board noting that the RBA staff forecast had inflation
returning to the top of band by end-2025 rather than the midpoint. Why is
this of note? Last week the Australian Treasurer announced that he
and the Bank had agreed to target the midpoint of the 2 – 3% band.
Prior to this there was a decent potential for the bank to dial back
its restrictive policy if it viewed hitting 3% as likely and
imminent. Now it'll have to wait until the 2.5 number is in sight.
And its not even close. That staff forecast puts the timing to hit 3%
by the end of 2025. That's another 2 years away. Goodness knows how
far away the new mid-point target is. The bank next meet on February
5 and 6, 2024. On January 31 the next official quarterly CPI will be
published and this will inform the February decision; If inflation
remains high and sticky the likelihood of another rate hike is high.
</p><p>AUD/USD
rose a little on the day. Apart from USD/JPY the big dollar dipped
just a little almost across the majors board.</p>

This article was written by Eamonn Sheridan at www.forexlive.com.