The quick devaluation of the Japanese yen (JPY) was one of the main stories of 2022. To halt the rapid decline, the Bank of Japan (BOJ) intervened twice in the market by selling US dollars and buying the yen.

While the BOJ’s actions were mainly intended to cap the USD/JPY exchange rate, they did affect all the JPY pairs. One of them, in particular, proved resilient to the BOJ’s actions.

The EUR/JPY.

It now trades close to levels not seen in five years. Strong resistance lies at 150 – will it be broken this year?

Inflation (or the lack of it) was a big problem for the BOJ’s credibility. For decades, it lay below the central bank’s target.

Not anymore. As mentioned here, inflation reached a 40-year high recently.

According to the last measures of underlying inflation in Japan, inflation is at its highest for October since the central bank started to release the data in 2001.

Nikkei Asia has recently reported that Japan’s food inflation has soared to a 31-year high. For example, frozen tuna prices jumped 60%, illustrating the dynamics in Japanese inflation.

Yet, the Bank of Japan is not raising rates. It preferred to intervene directly in the market rather than embark on a tightening cycle as most central banks did in 2022.

Nikkei Asia has recently reported that Japan’s food inflation has soared to a 31-year high. For example, frozen tuna prices jumped 60%, illustrating the dynamics in Japanese inflation.

Yet, the Bank of Japan is not raising rates. It preferred to intervene directly in the market rather than embark on a tightening cycle as most central banks did in 2022.

The BOJ’s intervention may have had some success on the USD/JPY exchange rate, as it trades now well below 150. But the EUR/JPY proved resilient, as it approaches the same critical level which offered strong resistance five years ago.

The last time the EUR/JPY exchange rate traded close to 150 was in 2017. This year it mainly consolidated levels, drifting higher even though sellers stepped in every time the pair made a new high.

From an Elliott Waves perspective, it appears that the EUR/JPY is in an impulsive structure. A weekly close above the 2017 resistance indicates more strength, as it would attract more buyers.

All in all, the BOJ’s intervention stopped the JPY’s decline in 2022. But will it be enough to scare investors from buying the JPY pairs next year?

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