USD/JPY continues to decline, primarily due to the pressure made by moderate weakness in dollar. In addition, yen rose slightly after the Cabinet Office raised its assessment of business sentiment in July, the first time in seven months. This clearly shows that Japan sees its economy still recovering at a moderate pace.
However, the International Monetary Fund (IMF) recently urged the Bank of Japan to abandon its accommodative policy due to warnings of higher inflation. Bank of Japan Governor Kadsuo Iwata disagrees with this, announcing today that the central bank will stick to its soft monetary policy, and within the framework of yield curve control, the long-term yield will remain stable.
Such a statement will likely limit the strength of yen, leading to a further rise in USD/JPY.
At present, traders should refrain from aggressive bets and wait for the outcome of the decisive Federal Reserve meeting. Presumably, the bank will raise interest rates by 25 basis points.
Additionally, on Thursday, the two-day monetary policy meeting of the Bank of Japan will begin.
