The USD/JPY exchange rate has been performing strongly this week. This week, the Bank of Japan is expected to announce its interest rate decision. The US is set to release the latest GDP and PCE figures on Thursday and Friday.

The focus in the forex market this week is on the USD/JPY exchange rate, with the Bank of Japan (BoJ) making its interest rate decision and the US economic data release. The rate was at 154.60 on Monday, higher than the low of 140.25 seen earlier in the year.

Bank of Japan interest rate decision and US economic data in spotlight

The USD to JPY pair has been on a strong uptrend this week as traders anticipate the Bank of Japan (BoJ) interest rate decision.

This BoJ meeting holds significance for two reasons. Firstly, it comes at a time when the Japanese yen is at a multi-year low, having surpassed the crucial level of 153. Secondly, the decision follows a month after the BoJ raised interest rates for the first time in over 17 years, moving from minus 0.10% to 0.0%. It is anticipated that the bank will keep the rates steady during the current meeting. Analysts are also predicting further rate hikes later in the year.

Japan has seen a rise in inflation over recent months, with the Consumer Price Index (CPI) climbing to 2.7% and core CPI at 2.6%, both exceeding the BoJ's 2.0% target. The situation may prompt the BoJ to raise rates sooner to counter rising inflation due to higher commodity prices and a weaker yen.

The USD/JPY rate has been climbing due to events in the US, where inflation has remained above 2%. There is an expectation that the Fed will hold interest rates at the current level or raise them during the year. The US will be releasing important economic data this week, including the GDP figures that are projected to have grown by over 2%, supported by massive stimulus packages initiated by Biden and Trump.

The US economy's performance, coupled with upcoming data like the PCE report, a key inflation indicator, is poised to keep investors leaning towards the higher-yielding US dollar over the Japanese yen.