UD Dollar (USD) has gathered downward momentum vs Japanese Yen (JPY), but it might not be able to break below 145.00. In the longer run, oversold weakness has not stabilized; there is a chance for USD to drop below 145.00 again before the risk of another rebound increases, UOB Group’s FX analysts Quek Ser Leang and Peter Chia note.
USD can drop below 145.00 again
24-HOUR VIEW: “Yesterday, we were of the view that USD ‘is likely to trade in a range between 146.00 and 149.00.’ USD traded in a 145.95/148.12 range and closed at 146.28. While the decline in the early Asian trade today has gathered momentum, USD might not be able to break below 145.00 (there is another support level at 144.40). Resistance levels are at 146.10 and 146.65.”
1-3 WEEKS VIEW: “When USD was at 147.50 yesterday (08 Apr), we pointed out that ‘the oversold weakness in USD has not stabilized.’ We indicated that ‘there is a chance for USD to drop below 145.00 again before the risk of another rebound increases.’ We will continue to hold the same view provided that 148.50 (‘strong resistance’ level was at 149.00 yesterday) is not breached. Looking ahead, if USD closes below 145.00, it will increase the likelihood of a drop to the significant support at 143.50.”
The Japanese Yen attracts some dip-buyers and reverses a part of the overnight losses.
BoJ rate cut bets and growing recession fears drive safe-haven flows towards the JPY.
Dovish Fed expectations weigh on the USD and also exert pressure on USD USD/JPY.
The Japanese Yen (JPY) trims a part of modest intraday gains against its American counterpart, though the near-term bias still seems tilted in favor of bullish traders. Concerns that harsher US reciprocal tariffs could negatively impact Japan’s economy, along with a slight improvement in the global risk sentiment, act as a headwind for the safe-haven JPY. However, the growing market acceptance that the Bank of Japan (BoJ) will continue raising interest rates in 2025, amid signs of broadening inflation, might hold back the JPY bears from placing aggressive bets.
Meanwhile, US President Donald Trump’s sweeping reciprocal tariffs raise the risk of a global economic slowdown. This should further contribute to limiting any meaningful JPY losses, which, along with the emergence of fresh US Dollar (USD) selling, keeps the USD/JPY pair below the 148.00 mark through the Asian session. Traders ramped up bets that a tariffs-driven US economic slowdown might force the Federal Reserve (Fed) to resume its rate-cutting cycle soon. This keeps the USD bulls on the defensive and should further benefit the lower-yielding JPY.
Japanese Yen bulls seen reluctant as improving global risk sentiment caps gains for safe-haven assets
Data released on Monday showed that Nominal Wages in Japan rose 3.1% year-on-year in February compared to the previous month’s downwardly revised 1.8% increase. Meanwhile, inflation-adjusted real wages contracted 1.2% in February, marking the second consecutive monthly decline and suggesting that high inflation is weighing on earnings.
In fact, the consumer inflation rate the government uses to calculate real wages grew 4.3% year-on-year. This comes on top of positive spring wage negotiations – which resulted in an agreement of 5.47% growth on average and offered a positive signal for the domestic economy – and backs the case for further policy normalization by the Bank of Japan.
Investors remain worried that US President Donald Trump’s sweeping reciprocal tariffs will disrupt the global trading system and hit economic activity across the world. Furthermore, Trump upped the ante in his trade war with China and threatened an additional 50% tariff on China if it doesn’t withdraw a retaliatory 34% import fee on American products.
This further fuels worries that steep trade barriers around the world’s largest consumer market could lead to a recession, which, in turn, assists the safe-haven Japanese Yen to attract some dip-buyers. The US Dollar, on the other hand, stalls a two-day-old recovery move from a multi-month low amid bets for aggressive interest rate cuts by the Federal Reserve.
Fed Chair Jerome Powell said on Friday that the US central bank was well positioned to wait for greater clarity before making changes like rate reductions and added that Trump’s tariffs could have a strong inflationary impact. Meanwhile, Trump called for the Fed to cut interest rates as soon as possible, arguing that the US economy is in a strong position.
Moreover, traders are now pricing in a greater possibility that the Fed will resume its rate-cutting cycle in June and deliver at least four rate cuts by the end of this year. This, in turn, would result in the further narrowing of the rate differential between the US and Japan, which suggests that the path of least resistance for the lower-yielding JPY is to the upside.
There isn’t any relevant market-moving economic data due for release from the US on Tuesday, leaving the USD at the mercy of trade-related developments and San Francisco Fed President Mary Daly’s scheduled speech. The focus, meanwhile, remains on the release of FOMC meeting minutes on Wednesday and US consumer inflation figures on Thursday.
USD/JPY needs to surpass 148.15 hurdle to support prospects for further recovery from multi-month low
From a technical perspective, the USD/JPY pair’s inability to find acceptance above the 148.00 mark and the subsequent slide warrant caution for bullish traders. Moreover, oscillators on the daily chart are holding in negative territory and are still away from being in the oversold zone, validating the near-term negative outlook for the currency pair. However, a sustained move beyond the Asian session high, around the 148.15 region, might trigger a short-covering rally and lift spot prices to the 148.70 intermediate hurdle en route to the 149.00 round figure. The next relevant barrier is pegged near the 149.35-149.40 region, which if cleared should pave the way for a move towards reclaiming the 150.00 psychological mark.
On the flip side, the 147.00 mark could offer some support, below which the USD/JPY pair could accelerate the slide back towards the 146.00 round figure before dropping to the 145.40 region. Some follow-through selling could make spot prices vulnerable and may weaken further below the 145.00 psychological mark and test the multi-month low, around the 144.55 region, touched on Monday. The subsequent downfall has the potential to drag the currency pair towards the 144.00 mark.
Risk sentiment FAQs
In the world of financial jargon the two widely used terms “risk-on” and “risk off” refer to the level of risk that investors are willing to stomach during the period referenced. In a “risk-on” market, investors are optimistic about the future and more willing to buy risky assets. In a “risk-off” market investors start to ‘play it safe’ because they are worried about the future, and therefore buy less risky assets that are more certain of bringing a return, even if it is relatively modest.
Typically, during periods of “risk-on”, stock markets will rise, most commodities – except Gold – will also gain in value, since they benefit from a positive growth outlook. The currencies of nations that are heavy commodity exporters strengthen because of increased demand, and Cryptocurrencies rise. In a “risk-off” market, Bonds go up – especially major government Bonds – Gold shines, and safe-haven currencies such as the Japanese Yen, Swiss Franc and US Dollar all benefit.
The Australian Dollar (AUD), the Canadian Dollar (CAD), the New Zealand Dollar (NZD) and minor FX like the Ruble (RUB) and the South African Rand (ZAR), all tend to rise in markets that are “risk-on”. This is because the economies of these currencies are heavily reliant on commodity exports for growth, and commodities tend to rise in price during risk-on periods. This is because investors foresee greater demand for raw materials in the future due to heightened economic activity.
The major currencies that tend to rise during periods of “risk-off” are the US Dollar (USD), the Japanese Yen (JPY) and the Swiss Franc (CHF). The US Dollar, because it is the world’s reserve currency, and because in times of crisis investors buy US government debt, which is seen as safe because the largest economy in the world is unlikely to default. The Yen, from increased demand for Japanese government bonds, because a high proportion are held by domestic investors who are unlikely to dump them – even in a crisis. The Swiss Franc, because strict Swiss banking laws offer investors enhanced capital protection.
The USD has had some mixed
performance since the tariffs announcement although overall it’s been
marginally stronger except against the safe havens like the Swiss Franc and the
Japanese Yen. There’s no real divergence in FX as the market continues to price
in more and more cuts for all the central banks.
At the moment, the market
is more driven by the risk-off sentiment amid the recessionary fears. Traders are
now fully pricing five rate cuts for the Fed by year-end with 60% chance of a
25 bps cut at the upcoming FOMC meeting despite Fed Chair Powell saying that
they are not in a hurry to cut rates.
On the JPY side, the
currency has been driven mainly by global events rather than domestic
fundamentals. The global stock market selloff and the growth fears made the
market to scale back rate hikes expectations with the BoJ now seen on hold for
the rest of the year.
The Japanese Yen continues
to remain supported amid the risk-off flows as the carry trades get unwound.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart, we can
see that USDJPY is consolidating around the lows. The sellers will likely
continue to pile in around these levels with a defined risk above the 146.60
level to keep pushing into the 140.00 handle. The buyers, on the other hand,
will want to see the price rising back above the 146.60 level to start
targeting the 148.60 level next.
USDJPY Technical
Analysis – 4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can
see more clearly the recent price action with the fakeout above the 146.60
level last Friday that was quickly reversed as the pair gapped lower at the
open today. The price action remains rangebound between the 145.18 support
and the 146.60 resistance. The market participants will look for a break on
either side to pile in with more conviction and extend the moves.
USDJPY Technical
Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, there’s
not much else we can add here as the buyers will look for a break above the
146.60 level, while the sellers will target a break below the 145.18 level.. The
red lines define the average daily range for today.
Upcoming
Catalysts
This week is going to be all about tariffs
news ahead of the April 9 deadline, so the data won’t matter much. Nevertheless,
we will get a couple of notable data releases. On Thursday, we get the US CPI
report and the latest US Jobless Claims figures, while on Friday we conclude
the week with the US PPI and the University of Michigan Consumer Sentiment
survey.
The USD sold off hard almost
across the board following Trump’s worse than expected tariffs announcement on
Wednesday. The market reacted to the news by pricing in aggressively more rate
cuts for the Fed in expectations of a bigger hit to the US economy compared to
the rest of the world.
At the moment, the market
is seeing 100 bps of easing by year end and 35% chance of a rate cut at the
upcoming meeting. Today we have the NFP report and especially Fed Chair Powell
speaking. These two events will shape the expectations further, especially
Powell’s speech.
On the JPY side, the
currency has been driven mainly by global events rather than domestic
fundamentals as the market even scaled back rate hikes expectations with just 7
bps of tightening seen by year end compared to 31 bps before Trump’s
announcement.
The Japanese Yen got a
boost from the risk-off flows triggered by Trump’s announcement which saw the
US Treasury yields falling as the market started to price in more and more rate
cuts from the Fed amid recessionary fears.
USDJPY
Technical Analysis – Daily Timeframe
USDJPY Daily
On the daily chart, we can
see that USDJPY couldn’t break above the key 151.00 resistance
and eventually sold off hard following the surprising worse than expected Trump’s
tariffs announcement.
We are now trading below
the March low, and the sellers will likely continue to pile in around these
levels to keep pushing into the next support around the 140.00 handle. The
buyers, on the other hand, will want to see the price rising back above the 146.60
level to start targeting a pullback into the 148.60 level next.
USDJPY Technical
Analysis – 4 hour Timeframe
USDJPY 4 hour
On the 4 hour chart, we can
see more clearly the recent price action with the big selloff following Trump’s
announcement. We can see that the pair is now consolidating between yesterday’s
low and the March low at 146.60. The buyers will look for a break higher to
position for a pullback into the 148.60 level next, while the sellers will look
for a break lower to increase the bearish bets into the 140.00 handle.
USDJPY Technical
Analysis – 1 hour Timeframe
USDJPY 1 hour
On the 1 hour chart, there’s
not much else we can add here as we will likely continue to consolidate until
the NFP report and Fed Chair Powell speech. The red lines define the average daily range for today.
Upcoming
Catalysts
Today we conclude the week with the US NFP
report and Fed Chair Powell speech.
The Japanese Yen attracts some buyers following the release of a strong Tokyo CPI print.
The BoJ’s hawkish stance and the risk-off mood further underpin the safe-haven JPY.
The US PCE Price Index due later this Friday should provide fresh impetus to USD/JPY.
The Japanese Yen (JPY) struggles to capitalize on a modest Asian session uptick led by strong consumer inflation data from Tokyo (Japan’s capital city), which keeps the door open for more interest rate hikes by the Bank of Japan (BoJ). Moreover, the BoJ Summary of Opinions indicated that a rate hike is still on the table if the economy and prices move in line with the forecast. The JPY bulls, however, seem reluctant to place aggressive bets amid worries that US President Donald Trump’s auto tariffs could impact key domestic exports.
This, along with a modest US Dollar (USD) uptick, keeps the USD/JPY pair well within striking distance of a nearly four-week top. Any meaningful USD appreciation, however, seems elusive in the wake of bets that the Federal Reserve (Fed) will resume its rate-cutting cycle soon. This marks a big divergence in comparison to hawkish BoJ expectations, which should continue to offer some support to the lower-yielding JPY. Traders now look forward to the US Personal Consumption Expenditure (PCE) Price Index for a fresh impetus.
Japanese Yen sticks to strong Tokyo CPI-led gains, bulls lack conviction amid trade-related worries
US President Donald Trump on Wednesday unveiled a 25% tariff on imported cars and light trucks to take effect on April 3. This fuels concerns that the levies would have a far-reaching impact on Japan’s auto industry, which accounts for roughly 3% of gross domestic product.
Data released earlier this Friday showed that the headline Consumer Price Index (CPI) in Tokyo rose 2.9% in March from 2.8% previous. Moreover, Tokyo Core CPI, which excludes volatile fresh food prices, climbed to 2.4% during the reported month from 2.2% in February.
Adding to this, a core reading that excludes both volatile fresh food and energy prices grew from 1.9% in the prior month to 2.2% in March. This is now above the Bank of Japan’s annual 2% target and backs the case for further interest rate hikes by the Japanese central bank.
BoJ Summary of Opinions from the March meeting revealed a consensus to continue raising rates if the economy and prices move in line with the forecast. The board, however, viewed that the policy must be kept steady for the time being as the downside risks to the economy have heightened due to the US tariff policy.
The global risk sentiment took a hit in reaction to Trump’s auto tariffs and worries that reciprocal tariffs next week will dent US growth. This overshadowed an upward revision of the US Q4 GDP, which showed that the economy grew at a 2.4% annualized pace vs 2.3% in the previous estimate.
Richmond President Thomas Barkin warned on Thursday that the economic uncertainty driven by the Trump administration’s trade policy could dampen consumer and business spending, and will force the central bank into a wait-and-see approach rather than the proactive stance most investors are hoping for.
Boston Fed President Susan Collins noted that the US central bank’s challenge at this point is to choose between maintaining a tight policy stance or trying to run ahead of data that might be souring in the future. Given the outlook, Collins expects the Fed to hold rates steady for longer.
Investors now look forward to the release of the US Personal Consumption Expenditure (PCE) Price Index, which could offer fresh cues about the Fed’s future interest rate-cut path. This, in turn, will drive the US Dollar and provide some meaningful impetus to the USD/JPY pair.
USD/JPY seems poised to prolong over two-week-old uptrend while above the 150.00 psychological mark
From a technical perspective, the intraday pullback from the vicinity of the monthly peak warrants caution before placing fresh bullish bets around the USD/JPY pair and positioning for further gains. Meanwhile, oscillators on the daily chart have just started gaining positive traction and support prospects for the emergence of some dip-buying near the 150.00 psychological mark. Some follow-through selling below the 149.85-149.80 region, however, would negate the positive bias and drag spot prices to the 149.25 support zone en route to the 149.00 round figure and the next relevant support near the 148.65 region.
On the flip side, a move beyond the monthly peak, around the 151.30 area, might confront some resistance near a technically significant 200-day Simple Moving Average (SMA), currently pegged near the 151.65 region. A sustained strength beyond the latter will be seen as a fresh trigger for bulls and allow the USD/JPY pair to reclaim the 152.00 mark. The positive momentum could extend further to the 152.45-152.50 region before spot prices aim to challenge the 100-day SMA, around the 153.00 round figure.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
Japan Chief Cabinet Secretary Yoshimasa Hayashi said on Thursday that they have “once again, asked the US to exempt Japan from auto tariffs.”
Further comments
“US auto tariffs are extremely regrettable.”
“Will continue to work closely with us and take necessary steps to resolve issue.”
Meanwhile, Japanese Prime Minister (PM) Shigeru Ishiba said on Thursday, Tokyo will put “all options on the table” in dealing with Washington’s announcement to impose a 25% tariff on automobile imports.
Market reaction
At the time of writing, USD/JPY is off the lows but remains 0.24% lower on the day near 150.20.
The safe-haven Japanese Yen continues to be undermined by the upbeat market mood.
The USD sits near a multi-week top set on Monday and also lends support to USD/JPY.
The divergent BoJ-Fed expectations warrant caution before placing fresh JPY bearish bets.
The Japanese Yen (JPY) recovers slightly after touching a three-week trough against its American counterpart during the Asian session on Tuesday. Minutes of the Bank of Japan’s (BoJ) January meeting showed that policymakers discussed under what conditions the central bank should raise interest rates further, which, in turn, offers some support to the JPY. Furthermore, the recent sharp narrowing of the rate differential between Japan and other countries turns out to be another factor that helps limit deeper JPY losses.
Meanwhile, the global risk sentiment remains well supported by hopes that US President Donald Trump’s so-called reciprocal tariffs will be narrower and less strict than initially feared. Adding to this, the optimism over a possible Russia-Ukraine peace deal and China’s stimulus measures to stimulate consumption further boost investors’ confidence. This holds back the JPY bulls from placing aggressive bets, which, along with the recent US Dollar (USD) bounce from a multi-month low, acts as a tailwind for the USD/JPY pair.
Japanese Yen bulls remain on the sidelines amid positive risk tone; hawkish BoJ expectations to limit losses
Reports on Sunday indicated that US President Donald Trump is planning a narrower, more targeted agenda for reciprocal tariffs set to take effect on April 2, fueling hopes for less disruptive tariffs and underpinning the risk sentiment.
Talks between the US and Russian delegations concluded on Monday, and the discussion was centered around trying to reach a Black Sea maritime ceasefire deal. According to Russian state media, RIA, a joint statement is expected on Tuesday.
Financial Times reports that China is considering including services in a multibillion-dollar subsidy program to stimulate consumption, further boosting investors’ confidence and driving flows away from the safe-haven Japanese Yen.
The US Dollar climbed to a nearly three-week high on Monday in reaction to the better-than-expected release of the US Composite PMI – which rose to 53.5 in March from 51.6 in the previous month –and further lends support to the USD/JPY pair.
Minutes of the Bank of Japan (BoJ) last policy meeting held in January showed most members agreed the likelihood of hitting the 2% inflation target had been rising. Moreover, policymakers discussed the pace of raising interest rates further.
Meanwhile, BoJ Governor Kazuo Ueda said in the parliament on Monday that our policy purpose is to achieve stable prices and that the central bank will adjust the degree of monetary easing if the 2% inflation target is likely to be achieved.
This comes on top of the growing acceptance that stronger wage growth could contribute to mounting domestic price pressures and keep the door open for more interest rate hikes by the BoJ, which should help limit further losses for the JPY.
In contrast, the Federal Reserve signaled last week that it is likely to deliver two 25 basis points rate cuts by the end of 2025. Traders, however, are pricing in the possibility of three quarter-point rate cuts at June, July, and October meetings.
Atlanta Fed President Raphael Bostic said on Monday that he anticipates slower progress on inflation in coming months and sees the central bank cutting benchmark interest rate only a quarter of a percentage point by the end of this year.
Tuesday’s US economic docket features the release of the Conference Board’s Consumer Confidence Index, New Home Sales, and the Richmond Manufacturing Index. This, along with Fed speak, could influence the USD price dynamics.
The focus, however, will remain glued to the Fed’s preferred inflation gauge – the US Personal Consumption Expenditure (PCE) Price Index on Friday – due on Friday, which will drive market expectations about the future rate-cut path.
USD/JPY is likely to attract dip-buyers at lower levens and find decent support near the 150.00 psychological mark
From a technical perspective, the overnight breakout above the 150.00 psychological mark and a subsequent move beyond last week’s swing high, around the 150.15 region, was seen as a key trigger for bullish traders. Moreover, oscillators on the daily chart have been gaining positive traction and support prospects for a further appreciating move for the USD/JPY pair. Hence, some follow-through strength beyond the 151.00 round figure, towards testing the monthly swing high around the 151.30 area, looks like a distinct possibility.
On the flip side, any corrective pullback might now attract fresh buyers near the 150.15 region, which should help limit the downside near the 150.00 mark. A convincing break below the latter, however, could drag the USD/JPY pair to the 149.30-149.25 intermediate support en route to the 149.00 round figure and the 148.70-148.65 horizontal zone. Failure to defend the said support levels will suggest that the recent recovery from a multi-month low has run out of steam and shift the near-term bias back in favor of bearish traders.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
The Greenback made a U-turn, building on Wednesday’s post-FOMC recovery and climbing to weekly highs as investors reassessed the Federal Reserve’s lack of urgency in cutting rates.
Here is what you need to know on Friday, March 21:
The US Dollar Index (DXY) regained the smile and returned to the area beyond the 104.00 barrier despite further weakness in US yields across the various maturity periods. The speech by the Fed’s Williams will be the sole release on the US docket at the end of the week.
EUR/USD succumbed to the marked rebound in the Greenback and receded to multi-day lows in the 1.0820-1.0810 band. The BuBa’s Mauderer is expected to speak.
GBP/USD came under renewed selling pressure and retested the 1.2940 region amid the widespread retracement in the risk complex. The GfK’s Consumer Confidence gauge will be released followed by Public Sector Net Borrowing figures.
USD/JPY reversed Wednesday’s drop and advanced marginally to the vicinity of the 149.00 level on Thursday. The Japanese Inflation Rate will be the salient event in the FX world on Friday along with Foreign Bond Investment readings.
AUD/USD lost further impulse and slipped back to weekly lows near 0.6270 following renewed buying interest in the US Dollar. The next data release in Oz will be the Monthly CPI Indicator on March 26.
Prices of the barrel of WTI maintained their choppy performance on Thursday, returning to the sub-$67.00 region on the back of the firm tone in the Greenback.
Prices of Gold rose to an all time high near $3,060 per troy ounce, deflating afterwards following the strong demand for the US Dollar. Silver prices plummeted to the vicinity of the $33.00 mark per ounce, or five-day lows.
The Japanese Yen attracts some sellers following the release of softer domestic data.
A modest USD recovery from a multi-month trough further lends support to USD/JPY.
The JPY moves little after the BoJ decision to keep short-term interest rates unchanged.
The Japanese Yen (JPY) sticks to its negative bias through the Asian session on Wednesday in the wake of weaker-than-expected domestic data and reacted little to the Bank of Japan’s (BoJ) decision to leave short-term interest rate target unchanged. Apart from this, a modest US Dollar (USD) bounce, from a multi-month low touched on Tuesday, assist the USD/JPY pair to maintain its bid tone around mid-149.00s.
Traders, however, seem reluctant to place aggressive bets and opt to wait for the post-meeting press conference, where comments from Governor Kazuo Ueda might infuse some volatility around the JPY. The focus will then shift to the outcome of a two-day FOMC meeting, scheduled to be announced later during the US session, which will influence the USD and provide some meaningful impetus to the USD/JPY pair.
Japanese Yen bulls remain on the defensive after the crucial BoJ decision
The Bank of Japan (BoJ) announced on Wednesday that it maintained the short-term interest rate target in the range of 0.40%- 0.50% after concluding its two-day monetary policy review meeting. In the accompanying policy statement, the central bank noted that the uncertainty surrounding Japan’s economy, prices remains high.
Data released earlier this Wednesday showed that Japan’s Trade Balance shifted to a surplus of ¥584.5 billion in February from a deficit of ¥415.43 billion in the same month a year earlier. The reversal was driven by a surge in exports, which increased by 11.4% YoY, and a larger-than-expected fall of 0.7% in imports.
Meanwhile, Japan’s Machinery Orders fell 3.5% MoM in January 2025, significantly worse than the 1.2% decline registered in the previous month. On an annual basis, Machinery Orders rose 4.4% during the reported month, slightly above December’s 4.3% increase, though the reading was below the 6.9% forecast.
Adding to this, a Reuters Tankan poll indicated that business sentiment among Japanese manufacturers worsened for the first time in three months during March amid concerns about US tariff policies and weakness in China’s economy. In fact, the manufacturers’ index came in at -1, down from +3 in February.
The results of Japan’s annual spring labor negotiations, which concluded on Friday, showed that firms largely agreed to union demands for strong wage growth for the third straight year. This could boost consumer spending and contribute to rising inflation, giving the BoJ headroom to keep hiking rates.
Investors on Wednesday will also focus on the outcome of a two-day FOMC monetary policy meeting, due to be announced later during the US session. Heading into the key central bank event risks, a modest US Dollar recovery from a multi-month low pushes the USD/JPY pair back above mid-149.00s.
From a technical perspective, the recent breakout above the 100-period Simple Moving Average (SMA) on the 4-hour chart was seen as a key trigger for bulls. Moreover, oscillators on the said chart are holding comfortably in positive territory and support prospects for additional gains. That said, the overnight failure ahead of the 150.00 psychological mark warrants some caution. Hence, it will be prudent to wait for a sustained strength beyond the said handle before positioning for a move towards the 150.75-150.80 region, or the 200-period SMA on the 4-hour chart, en route to the 151.00 round figure.
On the flip side, the 149.20 area, followed by the 149.00 mark and the 148.80 region (100-period SMA on the 4-hour chart) should act as immediate support. A convincing break below the latter will suggest that the recent move-up witnessed over the past week or so has run out of steam and drag the USD/JPY pair to the 148.25-148.20 support en route to the 148.00 mark. The downward trajectory could extend further towards the 147.70 area, 147.20 region, and the 147.00 mark before spot prices eventually drop to retest a multi-month low, around the 146.55-146.50 region touched on March 11.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
The Japanese Yen attracts sellers for the third consecutive day amid a positive risk tone.
A modest USD bounce from a multi-month low further lends support to the USD/JPY pair.
The divergent BoJ-Fed expectations might cap the pair ahead of central bank event risks.
The Japanese Yen (JPY) retains its negative bias amid a modest US Dollar (USD) recovery from a multi-month low and lifts the USD/JPY pair further beyond mid-149.00s, or a nearly two-week high during the Asian session on Tuesday. Furthermore, the upbeat market mood, bolstered by China’s latest stimulus measures and hopes for a Ukraine peace deal, underpins the safe-haven JPY and continues to push the USD/JPY pair higher for the third straight day.
Any meaningful JPY depreciation, however, still seems elusive in the wake of firming expectations that the Bank of Japan (BoJ) will continue raising interest rates in 2025. The bets were reaffirmed by positive results from Shunto spring wage negotiations. This marks a big divergence in comparison to the growing market acceptance that the Federal Reserve (Fed) will cut interest rates several times this year, which could cap gains for the USD and the USD/JPY pair.
Traders might also refrain from placing aggressive bets and opt to move to the sidelines ahead of this week’s key central bank event risks. The BoJ is scheduled to announce its policy decision on Wednesday, which will be followed by the outcome of a two-day FOMC meeting. Investors will look for cues about the future policy outlook, which, in turn, will play a key role in influencing and determining the next leg of a directional move for the USD/JPY pair.
Japanese Yen weakens further amid positive risk tone and some repositioning ahead of central bank event risk
Ahead of talks on Ukraine with Russian President Vladimir Putin, US President Donald Trump expressed optimism that both sides will be able to come to a ceasefire and ultimately a peace deal. This comes on top of China’s special action plan to boost domestic consumption announced over the weekend and remains supportive of the upbeat market mood.
Japan’s Finance Minister Katsunobu Kato spoke at his regular press conference on Tuesday and said that bond markets should dictate yield movements. Kato added that the government would respond appropriately while allowing market forces to drive bond price fluctuations. This follows a brief spike in the 40-year Japanese government bond yield to a record high.
The preliminary results of Japan’s annual spring labor negotiations, which concluded on Friday, showed that firms largely agreed to union demands for strong wage growth for the third consecutive year. This is expected to boost consumer spending and contribute to rising inflation, which, in turn, gives the Bank of Japan headroom to keep raising interest rates.
In contrast, traders are now pricing in the possibility of 25 basis points Fed rate cuts each at the June, July, and October policy meetings amid concerns about a tariff-driven US economic slowdown, signs of a cooling labor market, and easing inflation. This might cap the attempted US Dollar recovery from its lowest level since October 2024 touched on Monday.
On the economic data front, the US Census Bureau reported on Monday that Retail Sales in the US grew by 0.2% in February compared to the downwardly revised decline of 1.2% the prior month. This, however, was well short of expectations for a 0.7% rise, signaling consumer caution and compelling evidence for the Fed to resume its policy easing cycle soon.
Traders now look forward to Tuesday’s US economic docket – featuring the release of Building Permits, Housing Starts, and Industrial Production data – for some impetus. The focus, however, will remain glued to the crucial BoJ-Fed rate decisions on Wednesday, which will play a key in determining the next leg of a directional move for the USD/JPY pair.
USD/JPY could climb further towards 150.00 psychological mark; 100-period SMA on the 4-hour chart holds the key
From a technical perspective, the overnight breakout above the 100-period Simple Moving Average (SMA) on the 4-hour chart and subsequent strength above the 149.00 mark could be seen as a key trigger for bulls. Moreover, oscillators on the said chart have been gaining positive traction and support prospects for additional gains. Hence, some follow-through strength, back towards reclaiming the 150.00 psychological mark, looks like a distinct possibility. Any further move up, however, is more likely to confront stiff resistance and remain capped near the 150.75-150.80 region, representing the 200-period SMA on the 4-hour chart.
On the flip side, the 149.20 area, followed by the 149.00 mark and the 148.80 region (200-period SMA on the 4-hour chart) now seem to protect the immediate downside. A convincing break below the said support levels will suggest that the recent move-up witnessed over the past week or so has run out of steam and drag the USD/JPY pair to the 148.25-148.20 support en route to the 148.00 mark. The downward trajectory could extend further towards the 147.70 area, 147.20 region, and the 147.00 mark before spot prices eventually drop to retest a multi-month low, around the 146.55-146.50 region touched on March 11.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Bank of Japan (BoJ) Deputy Governor Shinichi Uchida said on Wednesday, I “don’t have a preset idea in mind on the pace of future rate hikes.”
Further comments
Don’t have a preset idea in mind on the pace of future rate hikes.
It is not as if we will be raising rates at each policy meeting.
Wage is key to gauging Japan’s trend inflation.
Must be vigilant to how price moves for goods people buy frequently affect inflation expectations.
Will debate policy decision at each meeting looking at economic, price developments.
Market reaction
At press time, USD/JPY holds minor gains near 149.80 following these comments.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Japanese Prime Minister (PM) Shigeru Ishiba said on Tuesday that “Japan is not pursuing so-called currency devaluation policy.”
Ishiba further noted that they “have had no phone call from US President Trump regarding forex policy.”
Market reaction
The Japanese Yen (JPY) is recovering some ground against the US Dollar (USD) following these comments. At the press time, USD/JPY is down 0.25% on the day at 149.11.
The Japanese Yen struggles to capitalize on its Asian session gains against a stronger USD.
Firming expectations for more BoJ rate hikes this year should help limit losses for the JPY.
Traders now look forward to the release of the crucial US PCE data for a fresh impetus.
The Japanese Yen (JPY) surrenders its intraday gains against the broadly stronger US Dollar (USD) after Prime Minister Shigeru Ishiba’s government reduced the FY25/26 budget plan to ¥115.2 trillion. Apart from this, the broadly stronger US Dollar (USD) assists the USD/JPY pair in reversing the Asian session slide to the 149.00 neighborhood. Any meaningful JPY depreciation, however, seems elusive in the wake of hawkish Bank of Japan (BoJ) expectations.
Investors seem convinced that the BoJ will hike interest rates further this year. The bets were reaffirmed by BoJ Deputy Governor Shinichi Uchida’s remarks, saying that the underlying inflation rate is gradually rising toward the 2% target. This offsets the softer Tokyo Consumer Price Index (CPI) print, which, along with the risk-off mood, should limit losses for the safe-haven JPY. The USD bulls might also opt to wait for the US Personal Consumption Expenditure (PCE) Price Index.
Japanese Yen bulls have the upper hand amid rising bets for more BoJ rate hikes this year
Japanese Prime Minister Shigeru Ishiba’s government announced that it reduced its FY25/26 Budget plan to ¥115.2 trillion. The government also said they will cut the new bond issuance to JPY28.6 trillion.
Bank of Japan Deputy Governor Shinichi Uchida said this Friday that Japan’s inflation rate is gradually rising towards the central bank’s 2% target as the economy sustains a moderate recovery path.
The Statistics Bureau of Japan reported that the headline Consumer Price Index (CPI) in Tokyo – Japan’s capital city – decelerated from 3.4% in the previous month to the 2.9% YoY rate in February.
Meanwhile, core CPI – which excludes volatile fresh food prices – eased more than expected, from an 11-month high of 2.5% touched in January to the 2.2% YoY rate during the reported month.
Furthermore, a core gauge that excludes both fresh food and energy prices, and is watched as a gauge of underlying inflation by the BoJ, came in at 1.9%, matching the previous month’s reading.
Separately, Japan’s Industrial Production fell by 1.1% MoM in January. This follows a 0.2% decrease in the previous month and marks the third consecutive month of decline in industrial output.
Investors, however, seem convinced that the BoJ will hike interest rates further, which, along with the risk-off mood, boosts the safe-haven Japanese Yen during the Asian session on Friday.
The US Dollar stands firm near the weekly top in the wake of Thursday’s data, showing that inflationary pressures continue to rise and backing the case for the Federal Reserve to hold steady.
The second reading of the US Gross Domestic Product showed that the economy expanded by a 2.3% annualized pace during the final quarter of 2024, matching the original estimate.
Additional details of the report published by the US Bureau of Economic Analysis revealed that the GDP Price Index rose 2.4% compared to the initial estimate of 2.2%.
This comes on top of worries that US President Donald Trump’s policies would reignite inflation and put additional pressure on the Federal Reserve to stick to its hawkish stance.
Kansas City Fed President Jeff Schmid said that recent surveys indicate a rise in consumer inflation expectations and that the central bank must stay focused on fully containing price pressures.
Cleveland Fed President Beth Hammack noted on Thursday that interest rates are likely on hold for the time being as inflation data starts to pose a growing problem for central policymakers.
Philadelphia Fed President Patrick Harker noted that progress toward the 2% inflation target has slowed and that the policy rate remains restrictive to continue putting downward pressure on inflation.
Investors now look forward to the release of the US Personal Consumption Expenditure (PCE) Price Index for cues about the Fed’s rate-cut path, which will drive the buck and the USD/JPY pair.
USD/JPY needs to move beyond weekly high to support prospects for further gains
From a technical perspective, spot prices remain confined in a familiar range held since the beginning of this week. Against the backdrop of the recent decline from the vicinity of the 159.00 mark, or the year-to-date high touched in January, the range-bound price action might still be categorized as a bearish consolidation phase. The negative outlook is reinforced by the fact that oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the downside and supports prospects for deeper losses.
In the meanwhile, the 149.00 round figure now seems to protect the immediate downside ahead of the 148.60-148.55 region, or the multi-month low touched on Tuesday. Some follow-through selling will be seen as a fresh trigger for bearish traders and drag the USD/JPY pair to the 148.00 mark en route to the next relevant support near the 147.35-147.30 area and the 147.00 round figure.
On the flip side, the 148.80 region, followed by the 150.00 psychological mark and the weekly high, around the 150.30 area, might continue to act as an immediate hurdle. A sustained strength beyond the latter, however, could trigger a short-covering rally and lift the USD/JPY pair further towards the 150.90-151.00 horizontal support breakpoint, now turned strong barrier. The momentum could extend further towards the 151.45 region en route to the 152.00 mark, though it is more likely to remain capped near the 152.40 zone. The latter represents the very important 200-day Simple Moving Average (SMA) and should act as a key pivotal point.
Japanese Yen FAQs
The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.
One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.
Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.
The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.
USD/JPY rebounds 0.35% from 151.64 low, driven by bond yield movements.
Technical analysis hints at bullish shift; resistance near 200-day SMA at 152.76.
Downside risks if SMA not surpassed; supports at 152.00 and 150.93 in focus.
The USD/JPY climbed during the North American session. It trades at 152.52 and posts gains of over 0.35% after hitting a daily low of 151.64. The rise of the US 10-year T-note bond yield spurred the rise of the pair, which is positively correlated to the yield of the 10-year.
USD/JPY Price Forecast: Technical outlook
The USD/JPY remains biased downward, even though buyers could challenge the 200-day Simple Moving Average (SMA) at 152.76. The momentum shifted slightly bullish even though the relative strength index (RSI) remains bearish, and the slope aims upwards.
If buyers regain the 200-day SMA, the following key resistance would be the 153.00 mark before testing the Senkou Span B base at 153.76.
On the other hand, if USD/JPY stays below the 200-day SMA, the first support would be the 152.00 figure. Further losses lie below the February 7 daily low of 150.93, followed by the December 3 swing low of 148.64.
USD/JPY Price Chart – Daily
Japanese Yen PRICE Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Swiss Franc.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
-0.53%
-0.60%
0.30%
-0.16%
-0.28%
-0.23%
0.16%
EUR
0.53%
-0.08%
0.85%
0.39%
0.25%
0.30%
0.70%
GBP
0.60%
0.08%
0.93%
0.46%
0.31%
0.36%
0.76%
JPY
-0.30%
-0.85%
-0.93%
-0.45%
-0.59%
-0.53%
-0.14%
CAD
0.16%
-0.39%
-0.46%
0.45%
-0.13%
-0.08%
0.31%
AUD
0.28%
-0.25%
-0.31%
0.59%
0.13%
0.05%
0.44%
NZD
0.23%
-0.30%
-0.36%
0.53%
0.08%
-0.05%
0.39%
CHF
-0.16%
-0.70%
-0.76%
0.14%
-0.31%
-0.44%
-0.39%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
Japan’s Economy Minister Ryosei Akazawa said on Tuesday that he ”will closely monitor the impact of the rate hike on the economy.”
Separately, the Bank of Japan (BoJ) announced that it would provide JPY200 billion through the outright purchase of commercial paper.
The Japanese central bank added that it would supply the US Dollar (USD) funds against pooled collateral.
Market reaction
USD/JPY is off the high but stays firm near 155.30 following these headlines, still up 0.50% on the day.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
The Bank of Japan is set to hike interest rates to 0.50% on Friday.
All eyes will remain on the language in the policy statement and Governor Ueda’s press conference.
The Japanese Yen could witness intense volatility on the BoJ policy announcements.
The Bank of Japan (BoJ) is widely expected to raise the short-term interest rate from 0.25% to a 17-year high of 0.50% in January, following the conclusion of its two-day monetary policy review on Friday.
The Japanese Yen (JPY) is set to rock on the BoJ policy announcements as investors seek to find fresh clues on the central bank’s next policy move.
What to expect from the BoJ interest rate decision?
The BoJ will likely begin 2025 with some action as it remains on track to revive its rate-hiking cycle after pausing for three consecutive meetings. In July 2024, the Japanese central bank unexpectedly raised rates by 15 basis points (bps) from 0.1% to 0.25%.
Markets speculated that a slew of hotter-than-expected inflation readings, the ongoing depreciation of the JPY and a fiscal budget strengthened the case for a BoJ rate hike at the January meeting.
Tokyo annual Consumer Price Index (CPI) rose 3% in November, up from 2.6% in October. Core inflation, which excludes food and energy costs, increased by 2.4% in the same period after reporting a 2.2% growth in October. Tokyo’s inflation numbers are widely considered a leading indicator of nationwide trends.
Meanwhile, Japan’s annual Producer Price Index (PPI) remained at 3.8% in December, driven primarily by high food prices, particularly a 31.8% increase in agricultural goods costs. Separately, the Japanese Cabinet approved a historic budget of $732 billion for the fiscal year beginning in April while restricting new bond issuance to its lowest level in 17 years, per Reuters.
The recent hawkish commentary from BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino also pointed to a likely rate hike this week. Ueda said on January 16 that the board members “will debate at next week’s meeting whether to hike rates.” In his speech on January 14, Himino noted: “Japan’s inflation expectations have gradually heightened, now around 1.5%. Japan’s economy is roughly moving in line with our scenario projecting underlying inflation, inflation expectations to both move around 2%.”
With a rate hike almost a given, the language of the policy statement and Governor Ueda’s post-policy meeting press conference, due at 06:30 GMT, will help determine the path of the Bank’s next policy move.
The BoJ is also set to publish its quarterly Outlook Report and is expected to raise its inflation projections amid the gradual depreciation of the Japanese Yen and a recent surge in the cost of rice, Bloomberg reported, citing people familiar with the matter.
Analysts at BBH said: “Two-day Bank of Japan meeting ends Friday with an expected 25 bp hike to 0.5%. Markets have firmed up the odds of a hike over the past week to around 85% after BOJ officials expressed more confidence on wage growth gathering momentum.”
“In our view, the bar for a hawkish surprise is high because the BoJ will want to avoid unsettling the markets as it did back in July. As such, the Yen is likely to remain under downside pressure as the markets continue to price in the policy rate to peak around 1% over the next two years, the analysts added. “
How could the Bank of Japan’s interest rate decision affect USD/JPY?
Reuters reported last week, citing sources familiar with the central bank’s thinking, the BoJ is expected to maintain its hawkish stance while raising rates. The hawkish hike could be influenced by global financial market developments, such as United States (US) President Donald Trump’s return to the White House.
If the BoJ struggles to provide consistent guidance on the next policy move, reiterating that it will remain data-dependent and make a decision on a meeting-by-meeting basis, the Japanese Yen is likely to resume its downslide against the US Dollar (USD).
USD/JPY could fall hard if the BoJ hints at a March rate hike while expressing increased concerns over inflation.
Any knee-jerk reaction to the BoJ policy announcements could be temporary heading into Governor Ueda’s presser. Investors will continue to pay close attention to US President Donald Trump’s tariff talks, which trigger a big market reaction.
From a technical perspective, Dhwani Mehta, Asian Session Lead Analyst at FXStreet, notes: “USD/JPY remains confined between the 21-day Simple Moving Average (SMA) and the 50-day variant in the run-up to the BoJ showdown. However, the 14-day Relative Strength Index (RSI) sits just above 50, suggesting that the pair could break the consolidative phase to the upside.”
“A hawkish BoJ hike could revive the USD/JPY correction from six-month highs of 158.88, smashing the pair toward the 200-day SMA at 152.85. The next support is seen at the 100-day SMA of 151.59. Further declines could challenge the 151.00 round level. Alternatively, buyers must yield a sustained break above the 21-day SMA at 157.13 to resume the uptrend toward the multi-month highs of 158.88. Buyers will then target the 160.00 psychological level,” Dhwani adds.
Economic Indicator
BoJ Monetary Policy Statement
At the end of each of its eight policy meetings, the Policy Board of the Bank of Japan (BoJ) releases an official monetary policy statement explaining its policy decision. By communicating the committee’s decision as well as its view on the economic outlook and the fall of the committee’s votes regarding whether interest rates or other policy tools should be adjusted, the statement gives clues as to future changes in monetary policy. The statement may influence the volatility of the Japanese Yen (JPY) and determine a short-term positive or negative trend. A hawkish view is considered bullish for JPY, whereas a dovish view is considered bearish.
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
USD/JPY stable despite volatility after Trump announces possible 25% tariffs on neighboring countries.
US Dollar Index (DXY) gains 0.29%, reaching 108.30, amid positive market sentiment.
Focus on upcoming Bank of Japan meeting; potential for 25 basis point rate hike expected.
The USD/JPY was virtually unchanged during the North American session on Tuesday, as traders assessed US President Donald Trump’s threats to impose 25% tariffs on Canada and Mexico as soon as February 1. The Greenback recovered as the major hit a daily high of 156.20. However, fears faded as the pair traded near 155.54, virtually unchanged.
USD/JPY consolidates near 155.50 on President Trump’s proposed tariffs on Canada and Mexico
Market sentiment remains upbeat, and the US Dollar climbs, as depicted by the US Dollar Index (DXY), which tracks the basket of six currencies against the buck, rising 0.29% to 108.30.
Meanwhile, traders in the FX markets would continue to be attentive to Trump’s rhetoric, which sent ripples late Monday in the US as he signed a tranche of executive orders, including illegal immigration and naming cartels as global terrorist organizations.
In addition, USD/JPY traders are focused on the Bank of Japan’s (BoJ) next monetary policy meeting. Interest rate probabilities suggest the BoJ would likely raise rates by 25 basis points to 0.50% for the first time since July last year.
This week, the US economic schedule remains absent until Thursday, when the Initial Jobless Claims data will be released, followed by Friday’s S&P Flash PMIs. In Japan, the docket will feature Trade Balance data and foreign Investment figures ahead of the BoJ meeting.
USD/JPY Price Forecast: Technical outlook
The USD/JPY uptrend remains intact, but recently, sellers stepped in and dragged spot prices from around 158.80 to the current level. Despite this, bears failed to clear a support trendline drawn from September 2024 lows near 154.50. Nevertheless, if USD/JPY holds below 156.00, further downside is seen once 155.00 is cleared. The next support would be the 154.50, followed by the 154.00 mark.
On the other hand, if USD/JPY rises past the Senkou-span A at 156.41, a test of 157.00 is on the cards. If surpassed, a jump toward the January 15 high of 158.03 is likely.
Japanese Yen PRICE Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Canadian Dollar.
USD
EUR
GBP
JPY
CAD
AUD
NZD
CHF
USD
0.25%
0.30%
-0.06%
0.56%
0.33%
0.45%
0.20%
EUR
-0.25%
0.06%
-0.24%
0.30%
0.08%
0.21%
-0.07%
GBP
-0.30%
-0.06%
-0.34%
0.24%
0.01%
0.14%
-0.12%
JPY
0.06%
0.24%
0.34%
0.61%
0.37%
0.48%
0.23%
CAD
-0.56%
-0.30%
-0.24%
-0.61%
-0.23%
-0.10%
-0.37%
AUD
-0.33%
-0.08%
-0.01%
-0.37%
0.23%
0.12%
-0.14%
NZD
-0.45%
-0.21%
-0.14%
-0.48%
0.10%
-0.12%
-0.27%
CHF
-0.20%
0.07%
0.12%
-0.23%
0.37%
0.14%
0.27%
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
