USD/JPY: Dollar Breaks ¥156 After Bank of Japan Keeps Rates Flat, Projects Inflation at 2%

Japanese central bank turned its back on its currency, which slipped further to the downside, marking a new 34-year low.

• The USDJPY pair is breathing the rarefied air of a 34-year high as bulls enjoy the cool breeze of fresh gains. The Bank of Japan had its regular meeting Friday morning and decided to leave rates unchanged, sending shockwaves to its currency. The Japanese yen pulled back even more as the US dollar punched through the ¥156.00 mark and hit a new peak of ¥156.82.
• None of this was a surprise. Markets had largely priced in an interest-rate hold at 0.1% after the Japanese central bank made its first rate increase in 17 years last time officials met. Now there is even more pressure on Japan’s policymakers to try and find a way to prop up the yen. Unfortunately for yen bulls, the currency has turned into the biggest loser amid major currencies this year. And this intensifies the chances of an intervention.
• What’s more, the BOJ said in its quarterly outlook that inflation is likely to remain around the ideal 2% target over the next three years. A battered yen, however, may contribute to a bump in consumer prices as it makes imported goods — such as energy, food, and technology — cost more. The last time the Japanese yen was trading beyond ¥156.00 to the dollar was in May 1990.