USDJPY: Economists Expect Bank of Japan to Raise Forecast for Core Inflation for Fiscal 2023 from 1.8% to More than 2.5%

The Bank of Japan last changed its yield curve adjustment policy in December last year: at that time it increased the tolerance from a quarter to half a percentage point, which shocked economists and caused government bonds to tumble. Now some banks believe the BoJ will widen the range to a full percentage point in either direction.

The USDJPY exchange rate fluctuated from a day's decline of 1.2% to a day's gain of 1% against the dollar after today’s jaw-dropping BoJ statement. It was last unchanged from the start of the trading session at 139.35.

Analysts at JPMorgan wrote they tend to maintain the investment bank's "bearish view" on the Japanese yen following Friday's decision by the Bank of Japan (BOJ) to make its key yield curve targeting policy more flexible.

In a research note, the analysts said that while the yen may rise "to some extent in the short term," it will be difficult for the BoJ to fundamentally change its accommodative stance until there is a change in what it sees as the key drivers of inflation.