USD/JPY sees little action after BOJ's status rate decision, downgrade of economic assessment

Bank of Japan's (BOJ) status quo rate decision and downward revision of current economic assessment struggles to elicit a reaction from yen traders, leaving USD/JPY sidelined above 103.50. 

The Japanese central bank has kept interest rates unchanged at -0.1% and retained the 10-year yield target at about 0%. However, the bank has revised the gross domestic product (GDP) target for the fiscal year 2020 to -5.6% from the previous projection of -5.5%. 

Other key points

Japan's economy is likely to follow an improving trend. 

BOJ sees the fiscal year 2021 GDP forecast at 3.9% vs. 3.6% previously.

The bank projects a core CPI of 0.5% in the fiscal year 2021 versus 0.4% previously.

The bank will purchase the necessary amount of Japanese bonds without setting an upper limit so that 10-year JGB yields will remain at around 0%.

 The rate decision and policy statement offer no hawkish/dovish surprises. As such, USD/JPY is barely moving. 

The pair will likely drop below Wednesday's low of 103.45 if the US treasury yields decline, putting pressure on the dollar. The 10-year yield is currently sidelined near 1.08%, having risen from 0.90% to 1.18% earlier this month. 

Investors are expecting the new US President to deliver a bigger spending package in follow-through to the recent announcement of the $1.9 trillion stimulus package. As such, most investment banks foresee a drop in the US dollar. 

Technical levels