The Japanese yen, paired with the US dollar, strengthened yesterday but failed to maintain comfortable levels. The current USDJPY exchange rate stands at 149.67.
Yesterday, Bloomberg reported that the Bank of Japan will likely discuss raising the price forecast for the financial year ending in March. This led to high volatility in the USDJPY pair, causing it to drop to 148.75.
While such discussions may take place, they do not necessarily indicate the Bank of Japan's readiness to take action. The monetary policy is expected to remain unchanged, at least in the foreseeable future. The USDJPY pair quickly returned to its previous following the news.
Inflation in Japan may decline in the short and medium term. It is unlikely to exceed 2% until wages in the country significantly surpass current levels. Amid domestic and global risks, prospects for economic growth also remain uncertain.
Moreover, the Bank of Japan will most likely continue capping Japanese government bond yields despite ongoing discussions about changing forecasts. This is not a positive sign for the yen.