Introduction
The Bank of Japan (BoJ) is set to welcome a new governor in April when Haruhiko Kuroda’s term in office expires. Reports suggest that former BoJ policy member Kazuo Ueda will take over the top position, with Shinichi Uchida and Ryozo Himino being offered deputy governor positions. The news of a potential shift in leadership has already sent ripples through the market, with the Japanese Yen grabbing a bid and the USD/JPY pair testing 130.00.
Current Monetary Policy
The current governor, Haruhiko Kuroda, has been instrumental in charting the country’s ultra-loose monetary policy, which has seen the BoJ maintain a negative interest rate and engage in massive asset purchases to boost the economy.
Market Reaction
However, the market seems to be pricing in a move away from this policy with the appointment of a new governor. This is reflected in the recent decline of the USD/JPY pair, which erased nearly all of its gains made earlier in the week.
The USD/JPY remains biased to the downside, with the 50-day moving average (dma) trading through the 200-dma last month, resulting in a death cross. The pair is now looking to break below the 20-dma, and a confirmed close below this indicator would suggest lower prices ahead.
Traders’ Sentiment
The market reaction to the news of the potential shift in BoJ leadership and monetary policy has been mixed. Retail trader data shows that 47.03% of traders are net-long, with the ratio of traders short to long at 1.13 to 1. The number of traders net-long has increased by 0.19% from yesterday but decreased by 8.27% from last week. On the other hand, the number of traders net-short has increased by 2.50% from yesterday and 6.36% from last week.
Contrarian views to crowd sentiment suggest that the USD/JPY prices may continue to rise. Traders are further net-short than they were yesterday and last week, and the combination of current sentiment and recent changes gives a stronger USD/JPY-bullish contrarian trading bias.
Conclusion
In conclusion, the appointment of a new governor for the Bank of Japan is set to bring about potential changes to the country’s monetary policy. The market reaction to this news has been mixed, with the Japanese Yen grabbing a bid and the USD/JPY testing 130.00, but with a bias to the downside. Retail trader data shows a mixture of net-long and net-short positions, with a stronger USD/JPY-bullish contrarian trading bias. The market will be closely watching the developments in the coming weeks to see how the new leadership at the BoJ will shape the future of monetary policy in Japan.
