After a quiet week, USD/JPY has posted gains on Thursday. In the North American session, the pair is trading at 111.41, down 0.02% on the day. On the release front, there are no major U.S. events for a second straight day. Later in the day, the focus shifts to the Bank of Japan, which will release the minutes of the February policy meeting.
The Bank of Japan minutes are unlikely to surprise the markets, as policymakers appear content to stick to current monetary policy. There is little pressure on the BoJ to raise interest rates, especially with the Federal Reserve and ECB putting a freeze on rate hikes for the time being. At the same time, the BoJ is concerned that the Japanese yen could rise if the global economy takes a downturn in 2019, which would weigh on exports and push low inflation levels even lower. If the yen does move higher, the BoJ will have to consider additional stimulus in order to keep the currency in check. Bottom line? The safe-haven yen is unlikely to record significant gains in the near future, barring unforeseen geopolitical tensions.
Investors will also be keeping an eye on the Federal Reserve, which holds a policy meeting on Wednesday. The Fed is widely expected to maintain the benchmark rate at a range between 2.25 – 2.50 percent. Investors will be expecting the Fed to play a dovish tune in the March rate statement. The Fed’s balance sheet will also be under scrutiny, with the policymakers expected to announce when they will stop reducing the $4 billion balance sheet. The Fed has been reducing assets by $50 billion a month, but there has been criticism that this tightening is choking economic growth. The Fed will also publish its new dot plot, which is used to convey its interest rate outlook.
