• Japan’s economy recovered far less than anticipated in the fourth quarter.
  • Kazuo Ueda is the government’s choice to succeed Kuroda as BOJ governor.
  • Analysts anticipate Ueda to demolish YCC sooner rather than later.

Today’s USD/JPY outlook is bearish. Japan’s economy avoided recession but recovered far less than anticipated in the fourth quarter as company investment fell, a sign of the central bank’s difficulty in gradually ending its extensive stimulus program. However, investors held on to hope for a shift in policy with the new governor, boosting the yen.

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While growing living costs are exerting pressure on private spending, analysts predict that the uncertain global economic picture will hinder Japan’s slow recovery from the COVID-19 pandemic’s effects.

According to government data released on Tuesday, the third-largest economy in the world expanded by an annualized 0.6% in the fourth quarter of 2022 after contracting by a revised 1.0% in July-September.

The poor numbers underline the challenging issue facing Kazuo Ueda, the government’s choice to succeed Kuroda as governor of the Bank of Japan, as he attempts to normalize the bank’s ultra-easy policies without hindering the shaky economic recovery.

The change in leadership at the BOJ puts a historical cap on Kuroda’s decade-long experiment in monetary policy, which aimed to shock people from a deflationary mindset. It may eventually cause Japan to align with other developed countries in favor of higher interest rates.

Analysts anticipate Ueda, who has previously cautioned against the risks of hasty rate hikes, to demolish YCC sooner rather than later while delaying tightening monetary policy.

USD/JPY key events today

Investor focus today will be on the US inflation report that will confirm whether inflation in the US is slowing. It will also guide investors on the Fed’s next move.

USD/JPY technical outlook: Bears pause at the 131.75 support

USD/JPY technical outlook

The 4-hour chart shows USD/JPY in a bearish move after finding resistance at the 132.75 level. However, indicators are still showing bulls are in charge. The price is still above the 30-SMA and the RSI above 50, signs that bulls are stronger than bears.

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If this is the case, the price will likely be stopped at the 131.75 support, where bulls will return and resume the bullish move. Bears can only take over if the price breaks below the 30-SMA.

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Source: https://www.forexcrunch.com/usd-jpy-outlook-japan-posts-weak-q4-economic-growth/