Yen Sinks After Dovish BOJ Hold

April 26, 2024
  • Q1 PCE data yesterday ran hot; there are upside risks to today’s March PCE data; personal income and spending will be reported at the same time; the U.S. growth outlook remains solid; Brazil reports mid-April IPCA inflation
  • ECB reported March inflation expectations; eurozone March money supply growth accelerated; U.K. consumer confidence continues to improve
  • Two-day BOJ meeting ended with a dovish hold; updated macro forecasts support a modest tightening path; USD/JPY has been very volatile today; Japan reported sharply lower April Tokyo CPI; New Zealand ANZ April consumer confidence fell sharply

The dollar is firm ahead of PCE data. DXY is trading higher near 105.673 after testing support near 105.50. The yen is the worst performing major after the dovish hold from the BOJ (see below). USD/JPY traded as low as 155 on unconfirmed reports of BOJ intervention (doubtful, see below) but has since recovered to trade at the new cycle high near 156.80. The euro is trading flat near $1.0730 while sterling is trading flat near $1.2510. The dollar rally should resume after this correction, as data confirm persistent inflation and robust growth in the U.S. This backdrop should keep upward pressure on U.S. yields, which in turn would be supportive of the dollar. We believe that while market easing expectations have adjusted violently this month, there is still room to go. When the market finally capitulates on the Fed, the dollar should gain further.


Q1 PCE data yesterday ran hot. PCE deflator came in at 3.4% SAAR while core PCE came in at 3.7% SAAR, the highest since Q2 2023. Yields remain elevated and Fed easing expectations have been pushed out even further. Odds of a June cut have fallen to around 10%, while July odds have fallen to 35% and September odds have fallen to 75%. Even a November cut is not fully priced in, with odds slightly below 100%.

Demand for the 7-year auction was soft. Bid/cover fell to 2.48 vs. 2.61 previously, while indirect bidders took 65.1% vs. 69.7% previously. That said, the market easily absorbed the $183 bln of notes that were sold this week, albeit at higher yields. The 2-year yield is trading at 5.00% and remains on track to test the October high near 5.26%, while the 10-year yield is trading near 4.69% and remains on track to test the October high near 5.02%.

There are upside risks to today’s March PCE data. Headline PCE inflation is expected to rise a tick to 2.6% y/y while core is expected to fall a tick to 2.7% y/y. The Cleveland Fed’s inflation Nowcast model estimates both headline and core PCE rose 2.7% y/y in March. Looking ahead to April, the model shows headline at 2.6% and core at 2.7% and so price pressures are likely to remain persistent.

Personal income and spending will be reported at the same time. Income is expected at 0.5% m/m vs. 0.3% in February while spending is expected at 0.6% vs. 0.8% in February. Real spending is expected at 0.3% m/m vs. 0.4% in February. We see upside risks to these spending numbers following the 1.1% m/m and 5.2% y/y surge in control group retail sales.

Q1 GDP data is worth discussing. Growth came in at 1.6% SAAR vs. 2.5% expected and 3.4% in Q4. Personal consumption remains the main growth driver at 2.5% SAAR vs. 3.0% expected and 3.3% in Q4. Looking at the components of growth, personal consumption and fixed investment remain strong, while government consumption and net exports subtracted from growth. Final sales to private domestic purchasers (excluding inventories, trade, and government spending) grew 3.1% SAAR vs. 3.3% in Q4 and 3.0% in Q3, and so underlying demand remains strong.

The U.S. growth outlook remains solid. The Atlanta Fed GDPNow model will release its initial Q2 estimate today. The New York Fed GDP nowcast model sees Q2 growth at 2.7% SAAR and will also be updated today. Its initial estimate for Q3 will come in early June.

Brazil reports mid-April IPCA inflation. Headline is expected at 3.85% y/y vs. 4.14% in mid-March. If so, it would be the lowest since mid-July 2023 and further within the 1.5-4.5% target range. At the last meeting March 20, COPOM cut rates 50 bp to 10.75% and signaled a similar cut at the next meeting May 8 before slowing the pace. However, recent BRL weakness warrants caution going forward. The market is pricing in a 25 bp cut in May, with around 50% odds of another 25 bp cut after that. Back in March, markets were pricing in a terminal rate near 9.0%.


ECB reported March inflation expectations. Median 1-year expectations fell a tick to 3.1%, the lowest since January 2022, while median 3-year expectations are still well-anchored at 2.5%. Both remain above the 2% target and so the ECB will be looking for further progress here.

Eurozone March money supply growth accelerated. Broad monetary growth (M3) rose 0.9% y/y vs. 0.6% expected and 0.4% in February. This was the strongest since May 2023 and supportive of the nascent eurozone recovery. The market continues to price in the first ECB cut in June, followed by cuts in September and December.

U.K. consumer confidence continues to improve. GfK reading rose to -19 in April vs. -20 expected and -21 in March. This matches the January reading, which was the highest since January 2022. GfK official said “Spring has arrived and maybe consumer confidence is, at last, slowly becoming brighter and heading in the right direction.” Indeed, confidence should rise further as inflation falls and the easing cycle gets under way. The Bank of England is expected to cut rates in either August or September, while a second cut in December is about 70% priced in.


Two-day Bank of Japan meeting ended with a dovish hold. The BOJ said it expected financial conditions to remain easy for the time being, suggesting little urgency to hike again. BOJ Governor Kazuo Ueda struck a cautious tone during his post-meeting press conference. Ueda did not specify when the BOJ will start to cut purchases of government bonds and pointed out that certainty for achieving the inflation target is rising gradually. Interestingly, Ueda noted that the weak yen is not having a big impact on underlying prices yet, reducing risk of an imminent intervention.

Updated macro forecasts were released. As reports suggested, the BOJ raised its inflation forecast for FY2024 to 2.8% vs. 2.4% previously. However, the FY25 forecast was raised just one tick to 1.9% while FY26 was added to the forecast horizon at 1.9%. The decision and forecasts support our view that the BOJ tightening cycle will remain very modest. The market agrees and is still pricing in only 20 bp of tightening in 2024 and 50 bp over the next two years. Such a modest cycle would likely keep upward pressure on USD/JPY.

USD/JPY has been very volatile today. After trading as high as 156.80 in the wake of the decision, the pair quickly fell to 155 on unconfirmed reports of BOJ intervention. It has since move back to trade near the day’s high. We do not think this was actual intervention; if it was, we think USD/JPY would have fallen much than just 1-2 big figures. Of course, this is all speculation and we will have to wait for the month MOF data to confirm.

Japan reported sharply lower April Tokyo CPI. Headline came in at 1.8% y/y vs. 2.5% expected and 2.6% in March, core ex-fresh food came in at 1.6% y/y vs. 2.2% expected and 2.4% in March, and core ex- energy came in at 1.8% y/y vs. 2.7% expected and 2.9% in March. Tokyo core was the lowest since March 2022 and well below the 2% target. However, the readings were distorted by educational subsidies for the city that officials said shaved around half a percentage point from inflation. That distortion won’t be picked up in the national CPI data, but underlying price pressures should remain muted.

New Zealand ANZ April consumer confidence fell sharply. The headline measure fell more than four points to 82.1, the lowest since May 2023 and pointing to a sluggish consumer spending outlook.  

Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries.This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners.© Brown Brothers Harriman & Co. 2022. All rights reserved.

As of June 15, 2022 Internet Explorer 11 is not supported by

Important Information for Non-U.S. Residents

You are required to read the following important information, which, in conjunction with the Terms and Conditions, governs your use of this website. Your use of this website and its contents constitute your acceptance of this information and those Terms and Conditions. If you do not agree with this information and the Terms and Conditions, you should immediately cease use of this website. The contents of this website have not been prepared for the benefit of investors outside of the United States. This website is not intended as a solicitation of the purchase or sale of any security or other financial instrument or any investment management services for any investor who resides in a jurisdiction other than the United States1. As a general matter, Brown Brothers Harriman & Co. and its subsidiaries (“BBH”) is not licensed or registered to solicit prospective investors and offer investment advisory services in jurisdictions outside of the United States. The information on this website is not intended to be distributed to, directed at or used by any person or entity in any jurisdiction or country where such distribution or use would be contrary to law or regulation. Persons in respect of whom such prohibitions apply must not access the website.  Under certain circumstances, BBH may provide services to investors located outside of the United States in accordance with applicable law. The conditions under which such services may be provided will be analyzed on a case-by-case basis by BBH. BBH will only accept investors from such jurisdictions or countries where it has made a determination that such an arrangement or relationship is permissible under the laws of that jurisdiction or country. The existence of this website is not intended to be a substitute for the type of analysis described above and is not intended as a solicitation of or recommendation to any prospective investor, including those located outside of the United States. Certain BBH products or services may not be available in certain jurisdictions. By choosing to access this website from any location other than the United States, you accept full responsibility for compliance with all local laws. The website contains content that has been obtained from sources that BBH believes to be reliable as of the date presented; however, BBH cannot guarantee the accuracy of such content, assure its completeness, or warrant that such information will not be changed. The content contained herein is current as of the date of issuance and is subject to change without notice. The website’s content does not constitute investment advice and should not be used as the basis for any investment decision. There is no guarantee that any investment objectives, expectations, targets described in this website or the  performance or profitability of any investment will be achieved. You understand that investing in securities and other financial instruments involves risks that may affect the value of the securities and may result in losses, including the potential loss of the principal invested, and you assume and are able to bear all such risks.  In no event shall BBH or any other affiliated party be liable for any direct, incidental, special, consequential, indirect, lost profits, loss of business or data, or punitive damages arising out of your use of this website. By clicking accept, you confirm that you accept  to the above Important Information along with Terms and Conditions.

1BBH sponsors UCITS Funds registered in Luxembourg, in certain jurisdictions. For information on those funds, please see

captcha image

Type in the word seen on the picture

I am a current investor in another jurisdiction