BOJ is likely to keep the interest rate as the markets look forward to UEDA’s rhetoric to go forward

• The Bank of Japan is expected to occupy 0.50 % interest rates in its meeting in May.
• The uncertainty related to the US -inspired trade war will be at the decision center.
• The Japanese yen can reduce the expected BOJ decision.

The Bank of Japan (BOJ) will announce its decision on monetary policy after a two -day meeting on Thursday, and the market participants are widely expecting that policy makers will maintain the standard interest rate at 0.50 %.

The focus will then turn into any signs of future monetary policy procedures in the foreseeable future, as well as new economic expectations, with the interrogation of the Japanese yen (JPY) as a result.

What do you expect from the interest rate decision from BOJ?

It was also said that the Japanese Central Bank may maintain interest rates at 0.50 %, which is the highest level in 17 years. The BOJ team delivered 25 BPS points in January amid 2 % progress towards inflation, but it remained in March.

With regard to expectations, BOJ expected GDP growth by 1.1 % for the fiscal year 2025 and 1 % for the fiscal year 2026 in January. Such a number can suffer from a review of the ongoing trade war, given that Japan is an export dependent economy. In addition, the average expectations for consumer enlargement were 2.4 % and 2 % for the same two years.

Meanwhile, the trade war (the United States)-the inspired commercial war continues, generating uncertainty about economic progress and inflation. Without progress in negotiations, Japan is likely to see a contraction in exports and reduce capital investment, as well as high inflation. This means that Japanese policy makers are likely to choose to keep the rates until a clearer picture appears.

Before announcing, Japanese Prime Minister Shigro Eshiba announced in mid -April some emergency economic measures to alleviate any impact on industries and families affected by American drawings. The package includes support for companies financing and subsidies to reduce gasoline prices by 10 yen (0.07 dollars) per liter (0.26 gallons), and partially covers electricity bills for three months from July.

Also, the Japanese Minister of Economy, Riosi Akazawa, who is responsible for commercial negotiations with the United States, repeated that they expect the full removal of fees. Moreover, he explained that the government is not considering sacrificing agricultural products for cars in negotiations.

Finally, Boj Kazuo Ueda said last week that the bank will continue to monitor economic data and prices carefully regarding the interest rate policy. UEDA will hold a press conference after the announcement, and his words will be examined in search of evidence of future monetary policy decisions.

As a note of colors, the United States published the first level data on Wednesday. The ADP employment change report showed that the private sector added 62,000 new job jobs in April, which is much worse than the 108,000 market participants. The initial estimate of the US GDP also erred in Q1 expectations, as the economy was contracted at an annual pace of 0.3 % compared to the expected expansion of 0.4 %. The numbers fueled speculation that the United States is facing stagnation in the foreseeable future amid Trump’s tariff, and financial markets turned to avoid risks before BOJ’s decision.

How can the interest rate of the Bank of Japan affect the dollar/JPY?

In general, market markets are in the decisions of the central bank, which means that the decision is in line with expectations must have a limited impact on JPY. Politics makers are expected to repeat that they will remain relied on data. However, descending reviews may affect expectations of the Japanese currency.

A scenario in which BOJ officials are optimistic about economic progress and progress in inflation is very unlikely, but it should lead to a more stable JPY. Given this, the JPY will be less after BOJ decision.

“The pair of the dollar hovers about 143.00 in the American session before BOJ’s announcement, and it progresses for a second consecutive day, but the upcoming capabilities seem to be well limited. 100 and 200 SMA remains to be directed much less, reflecting the dominant declining direction,” says Valeria Bidenarik, FXSTREET Senior Analysts.

“If Boj provides a message of sincerity, the risk of the dizziness/JPY turns to the downside, with a mark of 142.00 immediate support, before April 23 decreased per day at 141.35,” Bednarik added.