FOMC vs. BOJ: Who moves the Yen? FOMC vs. BOJ: Who moves the Yen? FOMC vs. BOJ: Who moves the Yen?

FOMC vs. BOJ: Who moves the Yen?

Forex 5 minutes to read
Charu Chanana

Head of FX Strategy

Summary:  The Japanese yen is poised for event-driven volatility next week as both the Bank of Japan (BOJ) and FOMC meetings are scheduled. While signals on a BOJ pivot have become clearer lately, the resulting yen strength could remain uncertain. The BOJ needs to adopt a more hawkish stance both in action and rhetoric for the yen to strengthen, which remains unlikely. Additionally, a surprise hawkish turn from the FOMC poses a significant risk.

Next week marks a significant confrontation between the two leading central banks, with considerable implications for the Japanese yen. The Bank of Japan (BOJ) meets early in the week with announcement due on March 19 and the FOMC meeting announcement is due on March 20 (2am SGT on March 21).

FOMC: Confidence in the disinflation narrative will be key

This week marked a second consecutive month of hot CPI print in the US. Markets had just come to terms with the hot January inflation print and pushed back on its rate cut expectations, which were earlier expected to begin in March. Still, there was a sense of lingering relief with disinflation, as January was seen to be a one-off blip and possibly affected by seasonality. However, two months of inflation beat can no longer be called a blip. Today’s PPI number will tell us more on where the Fed’s preferred inflation metric, PCE, could land in February. Should the PPI data also indicate elevated inflation levels, it could trigger a serious reassessment of the Fed’s and the market’s expectations regarding disinflation.

The March FOMC meeting is unlikely to bring any changes to interest rates. The target range for the Fed Funds rate will likely remain unchanged at 5.25-5.50%. Money markets are indicating no probability of any rate adjustment during this meeting. Markets are also pretty much aligned to Fed’s easing expectations for 2024, pricing in just slightly over 75bps of rate cuts this year. This means any shifts in dot plot median can be unnerving for the markets.

Fed's December Dot Plot. Source: Federal Reserve

The US economic growth has remained resilient so far, so it is unlikely that we get any adjustment to the GDP growth forecasts. However, upside risks to inflation forecasts are seen, and will likely amplify if PPI today also comes in hot. Market may start to reconsider whether the Fed’s March dot plot could see a hawkish shift, with the median dot indicating only 50bps of rate cuts this year as against December’s 75bps. As can be noted in the dot plot above, it will take only two Fed members to revise their expectation of 2024 policy rate higher by 25bps to move the median. Powell’s comments will also be key to watch for any shift in tone about any bumps in the confidence to achieving 2% inflation. Overall, risks for the FOMC meeting outcome next week are tilted hawkish.

BOJ: Dovish hike or a hawkish hold?

The other key central bank to watch next week is the Bank of Japan, and markets have increasingly priced in an exit from negative rates there. Early results of wage negotiations, recent media reports from Jiji Press and Nikkei, as well as BOJ commentary have all signalled that the BOJ might be preparing for a lift-off. Timing still remains uncertain, though.

Some of Japan’s biggest employers have started to announce the results of this year’s union wage negotiations. Toyota agreed to meet its union’s pay demands in full with record raises. Honda agreed for wage hike of 5.6% while Nippon Steel agreed for 14.2%. Overall wage hike in 2023 was 3.58% and for 2024 forecast is over 4%, the highest in three decades.

While this maybe a clear green light for the BOJ, the market only prices in a 10bps rate hike next week with just over a 50% probability and USDJPY reaction has been muted. This is a reminder, that the fate of the still remains in the hands of the Fed rather than the BOJ itself.

If the BOJ exits negative interest rate policy next week, to bring the short-term interest rate to 0%, we could see the JPY going higher. The extreme short positioning and undervaluation of the yen are reasons enough to support a rally. However, if the BOJ was to pivot, it will likely come with a dovish narrative around not to expect a continuous increase in interest rates. This could cap gains, especially at a time when markets will be nervous about what to expect from the FOMC the next day.

On the other hand, an unchanged rate decision from the BOJ will come against modest expectations of a rate hike, and it will likely result in yen weakness even if the commentary supports the case for an April rate hike.

USDJPY to 150 first or 140?

Going into next week, JPY faces risks from the clash of BOJ and FOMC. We outline four scenarios and the expected outcome for USDJPY in the table below.

Source: Saxo

In summary, risk reward remains tilted towards a weaker yen in light of the event risks next week. The real game changer for the JPY only happens if the BOJ removes negative interest rates and still guides for more interest rate hikes. That could trigger a USDJPY move below 140, but recent commentary suggests that remains unlikely. For now, that would mean USDJPY will retain its dependency on yield differentials, and it will remain a preferred carry play.


Other recent Macro/FX articles:

14 Mar: Global Market Quick Take - Asia
12 Mar: Dampening equity sentiment could test GBP resilience
11 Mar: US inflation report: How to trade the event
11 Mar: Macro & FX Podcast: Have soft landing hopes turned into expectations?
11 Mar: Weekly FX Chartbook: JPY eying wage talk headlines and US CPI
6 Mar: Bitcoin fever is running high, again
6 Mar: Global Market Quick Take - Asia
5 Mar: FX & Macro Podcast: US jobs data, China's "Two Sessions" & Super Tuesday
4 Mar: Weekly FX Chartbook: NFP miss may not be enough to turn the dollar around
28 Feb: Navigating Japanese equities: Strategies for hedging JPY exposure
26 Feb: Weekly FX Chartbook: Focus will shift back to inflation and rates trajectory
23 Feb: Nvidia momentum spills over to FX markets
21 Feb: Central bank divergence on the radar: Hawkish RBNZ, Dovish BOC and SNB
19 Feb: Macro & FX Podcast: How the debate about the US economy has shifted
19 Feb: Weekly FX Chartbook: Dollar rally looking stretched, bullish signals for NZD
15 Feb: Swiss Franc’s bearish view gets more legs
14 Feb: Sticky US inflation could make dollar strength more durable
13 Feb: Weekly FX Chartbook: US and UK disinflation story in focus, watch for ECB split widening
9 Feb: Japanese Yen is throwing a warning
8 Feb: FX 101: USD Smile and portfolio impacts from King Dollar
5 Feb: Weekly FX Chartbook: More and more reasons to stay long US dollar
1 Feb: FOMC out, BOE and NFP next – will the hawkish waves continue?


The Saxo Group entities each provide execution-only service, and access to analysis permitting a person to view and/or use content available on or via the website is not intended to and does not change or expand on this. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Inspiration Disclaimer and (v) Notices applying to Trade Inspiration, Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular, no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Please read our disclaimers:
Notification on Non-Independent Investment Research (
Full disclaimer (

None of the information contained here constitutes an offer to purchase or sell a financial instrument, or to make any investments. Saxo Markets does not take into account your personal investment objectives or financial situation and makes no representation and assumes no liability as to the accuracy or completeness of the information nor for any loss arising from any investment made in reliance of this presentation. Any opinions made are subject to change and may be personal to the author. These may not necessarily reflect the opinion of Saxo Markets or its affiliates.

Saxo Markets
88 Market Street
CapitaSpring #31-01
Singapore 048948

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website are not intended for residents of the United States, Malaysia and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.

Apple and the Apple logo are trademarks of Apple Inc, registered in the US and other countries and regions. App Store is a service mark of Apple Inc. Google Play and the Google Play logo are trademarks of Google LLC.