Hawks vs Doves – USDJPY Reaches 20-Year Highs

April 20, 2022 09:35

The rapidly diverging monetary policies between the Federal Reserve and the Bank of Japan turned into a battle between the hawks and the doves as the USDJPY hit 20-year highs this week.  

The USD is flying high on hawkish rhetoric after St. Louis Federal Reserve President Bullard said he supports a 0.75 percent hike in key interest rate guidance to rein in high inflation. By contrast, the Bank of Japan (BoJ) holds its short-term policy rate at minus 0.1 percent.  

Will the BoJ be forced to hike rates to support the Yen? Like the US central bankers, Japan’s monetary policy makers target an annual inflation rate of around 2 percent and corporate inflation is hotter, meaning that import prices for raw materials are spiking. On the other hand, historically Japan’s exports tend to sell faster because of the weaker Yen, making them more competitive.  

In related developments, the BoJ promised an unlimited purchasing program of Japanese Government Bonds to support the Yen and in its March meeting, forecast that it ‘expects short- and long-term policy interest rates to remain at their present or lower levels.’ The BoJ’s next meeting is in May when the question of whether the central bank can sustain its negative interest rate guidance in the face of the current inflationary headwinds will be answered.  

Interested in learning more about fundamental analysis? Register for Admirals Webinars!

Free trading webinars

Tune into live webinars hosted by our trading experts


Crude oil is the cause of all the inflationary headaches for monetary policy makers. Spot prices remain elevated and there are concerns about how high future prices could rise given the twin pressures of a recovery from COVID-19 and the ongoing conflict in Ukraine.  

Monetary policy remains a key theme this week ahead of several speeches by Bank of England Governor Bailey, Federal Chairman Powell and ECB President Lagarde on Thursday. The GBP and EUR are under pressure from the stronger USD and there may be more movement in the currency crosses if Chairman Powell supports or intensifies the hawkish rhetoric.  

The market-moving news to watch for NZD traders comes up later today with New Zealand’s year-on-year CPI figures for the first quarter. The kiwi may move against other currencies when the latest price figures are announced. CPI is expected to be at the level of 7.1 percent versus 5.9 percent previously and – should expectations be met – the Reserve Bank of New Zealand may act to raise its official cash rate again.  

Keep up with all the latest trading events in Admirals Forex Calendar.  

Invest in the world’s top instruments

Thousands of stocks and ETFs at your fingertips


This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks. 

Sarah Fenwick
Sarah Fenwick Financial Writer, Admirals London

Sarah Fenwick's background is in journalism and mass communications. She has worked as a correspondent covering Swiss Stock Exchange news and written about finance and economics for 15 years.