GBPJPY: BoJ Interest Rates Incoming (April 11th)

Fundamental Factors Affecting the Japanese Economy & Yen

1. Rate Cut Looming Despite Rising Inflation Expectations
   • BOJ survey shows 86.7% of households expect price increases, the highest since June 2024.
   • Wage and price hikes are finally materializing, suggesting Japan may be close to sustainable inflation—usually a trigger for rate hikes.
   • However, geopolitical shocks (Trump's tariffs) have derailed the hiking narrative.
2. Tariffs Trigger Shift to Easing
   • Trump's 125% tariffs on China and other reciprocal trade measures have revived global recession fears.
   • Markets recall the August 2024 crash following an earlier round of tariffs—leading analysts to predict that the BOJ may cut rates imminently (possibly today or tomorrow) to stabilize sentiment.
   • Naomi Muguruma of MUFG has pushed back her rate hike forecast by six months to January 2026.
3. Tightening QE, Shrinking BOJ Footprint in Bond Market
   • BOJ began reducing bond purchases last year, targeting a 7–8% cut by early 2026.
   • Focus has shifted from short-term JGBs to super-long maturities, starting last month.
   • The Ministry of Finance is now seeking foreign buyers to plug the demand gap.

Key Takeaway for Traders

• BOJ Rate Cut = Likely Today or Tomorrow. If delivered, it could trigger a broad risk-on rally—especially in Japanese equities, global bonds, crypto, and gold.
• However, structural pressure on the yen will persist, particularly if foreign inflows don't fill the bond-buying gap left by BOJ.
• Risk: If Japan's inflation expectations keep rising, today's easing could backfire long-term, leaving the BOJ with even fewer options if the trade war intensifies.

GBPJPY – D1 Timeframe

The price action on the daily timeframe chart of GBPJPY shows an initial bullish break of structure, followed by a steady retracement towards the drop-base-rally demand that gave off the initial bullish momentum. On this basis, I am inclined to search for confluences in favor of the bullish direction on the lower timeframes.

GBPJPY – H1 Timeframe

On the 1-hour timeframe chart of GBPJPY, we see that the recent bullish reaction from the daily timeframe demand zone sparked a bullish impulse that broke both the bearish market structure and the trendline resistance. On this note, waiting for a retest of the 1-hour demand zone within the daily timeframe demand region is the requisite confirmation for entry.

Analyst's Expectations: 

Direction: Bullish

Invalidation- 183.670

Target- 193.311

CONCLUSION

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