Bank of Japan Governor Ueda Kazuo stated at a press conference following the policy meeting at the Tokyo headquarters that Japan's core inflation is gradually accelerating and steadily approaching the central bank's 2% target. However, achieving this goal must be based on robust and sustainable wage growth, not solely on cost-push price increases. This remark was made prior to the conclusion of the Bank of Japan's two-day policy meeting, with widespread market expectations that the policy rate will remain unchanged at 0.75% in the current environment. The macro environment facing the Bank of Japan has become more complex. Ongoing conflicts in the Middle East continue to drive up international oil prices, further intensifying existing inflationary pressures. Given Japan's heavy reliance on energy imports, input-driven inflation has a particularly significant impact on overall price levels, necessitating increased caution from the central bank in deciding whether and when to raise interest rates to avoid unnecessary shocks to the still fragile economic recovery. In this context, companies have gradually enhanced their ability to pass on raw material and labor costs to final prices, fostering a mild positive linkage between wages and prices. Ueda anticipates that Japan's underlying inflation will stabilize near 2% from the latter half of fiscal 2026 through 2027, potentially enabling a gradual exit from prolonged low inflation. The Bank of Japan emphasizes it will steer monetary policy appropriately to achieve a sustainable and stable 2% inflation target, supported by wage growth. This stance aligns with the government's policy orientation, which aims to ensure inflation reflects improvements in domestic economic fundamentals rather than external cost drivers like energy. However, Ueda did not reaffirm the previous explicit guidance to "continue raising rates as long as economic recovery persists," indicating a more cautious policy approach. Despite core inflation exceeding the target for nearly four consecutive years, the central bank maintains that underlying inflation driven by domestic demand and wages is not yet fully on track, justifying restraint on interest rate hikes.

The U.S.' high inflation cycle, which began in 2021, has endured for five years, establishing itself as a pivotal factor shaping economic conditions and policy decisions. Initially, the Federal Reserve characterized inflation as a "transitory" issue, sustaining low interest rates to bolster economic recovery, but inflation subsequently accelerated beyond control. By the end of 2021, the year-on-year increase in the Personal Consumption Expenditures price index surpassed 6%, rising above 7% in mid-2022, while the Consumer Price Index surged beyond 9%, marking the highest levels in decades. In response to persistently higher-than-expected inflation, the Fed implemented rapid and aggressive interest rate hikes starting in 2022, aiming to suppress demand and curb price pressures. This inflationary episode has significantly eroded real household income, with price increases largely offsetting wage gains in recent years, disproportionately impacting low-income groups. Currently, the real purchasing power of one dollar has declined to roughly 79 cents compared to its value in early 2020. Simultaneously, rising interest rates have profoundly transformed the landscape of the U.S. real estate market. During the COVID-19 pandemic, mortgage rates below 3% became commonplace. However, following policy tightening, rates swiftly climbed above 6%, significantly increasing home purchasing costs and visibly dampening demand. The market currently anticipates the Federal Reserve will hold rates steady at its upcoming meeting, yet inflation remains about one percentage point above its 2% target, keeping overall monetary policy in a restrictive stance. Concurrently, the oil price surge triggered by Middle East conflict has introduced new inflation risks, with international crude prices sustained above US$100 per barrel and gasoline prices roughly 25% higher than pre-conflict levels. This could fuel renewed price pressures through cost pass-through. In the housing market, high interest rates combined with supply constraints have markedly decelerated U.S. home price growth. While cumulative price appreciation since the pandemic exceeds 50%, recent increases have slowed noticeably. Prices are projected to grow only moderately in the coming years, with gains of approximately 1.8% in 2026 and 2.5% in 2027. This subdued market activity stems from high rates eroding affordability and a significant number of existing homeowners opting not to sell to retain their previously locked-in low-rate mortgages, thereby constraining supply. The current 30-year mortgage rate stands near 6.2% and is likely to persist around 6% for an extended period, with potential for a brief rise to 7% should inflationary pressures intensify.

Analyzing the USDJPY in the 1H timeframe, the Bollinger Bands have opened downwards, with moving averages diverging lower. The price is oscillating downwards near the EMA12 and the lower Bollinger Band. Following a MACD death cross, the MACD line and signal line have remained below the zero line. Although downside momentum is gradually weakening, no clear reversal signals are present, indicating the downtrend is likely to continue. The price is highly probable to test support near the lower Bollinger Band and the EMA200, around 158.7 and 158.5 respectively. The RSI reading of 43 suggests market participants are predominantly selling. In the 4H timeframe, the Bollinger Bands are contracting, moving averages are flattening, and the price is consolidating around the EMA12 and the middle Bollinger Band, showing diminished upward momentum. After a MACD death cross, the MACD line and signal line have retraced to near the zero line, suggesting a potential trend shift is imminent. The RSI reading of 48, with its peaks declining, reflects prevailing market pessimism. The strategy is to first enter short positions, followed by long positions.

Trading Direction: Sell

Entry Price: 158.9

Target Price: 157

Stop Loss: 160

Support: 158, 157, 155

Resistance: 160, 161, 162