Backtesting the effect of the BoJ`s monetary policy statement on USD/JPY

A backtesting is a type of predictive mode using historic data to forecast future movements. This post shall cover how the USD/JPY pair behaves prior, during and after the Bank of Japan`s (BoJ) monetary policy statement.

For March, the pair was at 103.237 at the start of the new day, while strengthening to 103.195 an hour after the statement was made public. The downtrend continued till 15th March.

In April (8/4). the same trend could be seen where USD/JPY dropped after the statement came out at 10.50 am.

Again, the second monetary policy statement in April shared the same trend as the two before. The lowest level for the day was 57.1 pips lower than the open.

This is the chart during the monetary policy statement in May, the downtrend lasted for a shorter period.

USD/JPY chart from March


This test is based purely on trend and does not take into account the content of the statement which would affect the movements in a greater scale. In conclusion, a drop in USD/JPY is present in every monetary policy statement since February this year. However, the downtrend tends to last for a shorter period every time. This is due to the fact that quantitative easing is expected some time in future and when that happens, USD/JPY is expected to spike upwards instead.