USD/JPY Forecast as Japanese Yen Plunges to Record Low

The USD/JPY price continued soaring on Wednesday as concerns about the Bank of Japan’s (BoJ) actions continued. The pair surged to an all-time high of 146.38, meaning it has surged by almost 30% this year. 

Japanese yen crash continues 

The USD/JPY price has been in a strong bullish trend in 2022, making the Japanese yen the worst-performing G10 currency.

This bullish trend is mostly because of the ongoing divergence between the Federal Reserve and the Bank of Japan. On the one hand, the BoJ has maintained an extremely hawkish tone this year as inflation has surged. 

The Fed hiked interest rates by 300 basis points and reduced its balance sheet through its quantitative tightening (QT) process. Recent data suggest that the bank has room for more hikes.

For example, on Friday, jobs data from the US showed that the country’s unemployment rate dropped to 3.5% in September. Additional data published on Wednesday showed that the producer price index (PPI) rose by 8.5% in September.

On the other hand, the Bank of Japan is the only hold-out on interest rates. The bank has left interest rates at a negative level for years. It has also continued to buy government bonds and mortgage backed securities (MBS) aggressively through its quantitative easing policy.

The BoJ argues that Japan’s inflation remains substantially lower than its peers. Most recent data showed that the country’s inflation is about 2.5%. At the same time, the bank argues that inflation is mostly because of energy prices. As such, it expects that real inflation is significantly low in the country.

The next key catalyst for the USD/JPY price will be the upcoming FOMC minutes and US inflation data scheduled for Thursday.

USD/JPY forecast

The four-hour chart shows that the USD/JPY price has been in a strong bullish trend in the past weeks. It has managed to move above the 25-day and 50-day moving averages while the MACD has moved above the neutral level. The Relative Strength Index (RSI) has also kept rising.

Therefore, the pair will likely continue rising as bulls target the next key resistance level at 147. Learn more about how to send money to Japan here.