Decisions by the Federal Reserve and the Bank of Japan later this month will end the dollar’s slide against the yen USD/JPY, analysts said.
Based on the Fed‘s hawkish comments, the June dot plot, core personal consumption expenditures and a strong labor market, the Fed could raise rates later this month and signal further tightening as soon as its September meeting.
That should push U.S. Treasury yields higher, and with it the U.S.-Japan exchange rate.
Although Japan’s labor force cash income rose 2.5% year-on-year in May, the BOJ will need more than a month of data before it knows wages are on track and will remain at the height needed to support 2% inflation.
With BOJ Governor Kazuo Ueda apparently in no rush to change the YCC, the central bank’s policy change could be delayed until later this year at the earliest.
USD/JPY could extend its decline in the short-term if US CPI falls below expectations tonight, but after that, the bulls will re-emerge in the coming days.