Key points

  • BoJ’s pruning hawkishness: The BOJ left rates unchanged at 0.25% and signaled a cautious approach to further hikes, likely delaying any action until next year, due to fading inflation risks and a need to monitor wage growth.

  • Q4 volatility may bring additional caution: Both local Japan elections and US Presidential elections could add a further sense of caution for Governor Ueda towards more rate hikes especially after the impact on the markets after the BOJ’s July rate hike.

  • Yen outlook: The yen outlook remains cautiously bullish, with potential gains expected to be gradual and choppy as both the Fed and BOJ preach gradualism. JPY could still serve as a defensive hedge against rising geopolitical risks.

The Bank of Japan (BOJ) left its interest rates unchanged at 0.25%, as expected. While the decision itself wasn’t surprising, Governor Ueda’s dovish remarks hinted at caution regarding further rate hikes.

With inflation risks easing and the central bank closely monitoring wage growth sustainability, the BOJ seemed to lack any urgency on another rate hike. Rising volatility from Japan’s local elections and the U.S. presidential election in Q4 further lowers the likelihood of a rate hike in 2024.

Dovish hints from Governor Ueda

  • Inflation upside risks are easing due to the impact of fading JPY weakness.

  • The BOJ is watching the impact of the two rate hikes implemented earlier this year.

  • There is caution due to the market impact following the July rate hike.

While the BOJ upgraded its view on consumer spending today, domestic growth remains heavily dependent on the global economy’s trajectory—whether it will achieve a smooth soft landing or face a recession. The central bank is also waiting for October services price data and further insight into wage trends before spring wage negotiations next year.

These factors suggest that Governor Ueda is in no rush to raise rates. Inflation expectations remain in focus, but the BOJ is likely to wait for more conclusive data, potentially delaying any rate hike until December or even 2025.

Yen gains to be more orderly as Fed and BoJ preach gradualism

The yen’s bullish outlook remains intact given that the Fed-BOJ yield gap will stay in a downtrend over the medium-term. However, gains could be tempered by both the Fed and BOJ’s patient approach.

With upcoming local and U.S. elections in Q4 expected to drive volatility, a BOJ rate hike this year is increasingly unlikely. While wage growth and inflation trends keep the possibility of another rate hike alive next year, yen gains are expected to be more gradual and choppy in the near term.

However, the yen could still serve as an effective defensive hedge amid rising geopolitical risks. More pronounced yen strength would likely require a sharper downturn in the U.S. economy, particularly if recession fears intensify.

Chart

Source: Saxo. Disclaimer: Past performance does not indicate future performance.

Read the original analysis: JPY: Bank of Japan’s tapering hawkishness

The Saxo Bank Group entities each provide execution-only service and access to Analysis permitting a person to view and/or use content available on or via the website. This content is not intended to and does not change or expand on the execution-only service. Such access and use are at all times subject to (i) The Terms of Use; (ii) Full Disclaimer; (iii) The Risk Warning; (iv) the Rules of Engagement and (v) Notices applying to Saxo News & Research and/or its content in addition (where relevant) to the terms governing the use of hyperlinks on the website of a member of the Saxo Bank Group by which access to Saxo News & Research is gained. Such content is therefore provided as no more than information. In particular no advice is intended to be provided or to be relied on as provided nor endorsed by any Saxo Bank Group entity; nor is it to be construed as solicitation or an incentive provided to subscribe for or sell or purchase any financial instrument. All trading or investments you make must be pursuant to your own unprompted and informed self-directed decision. As such no Saxo Bank Group entity will have or be liable for any losses that you may sustain as a result of any investment decision made in reliance on information which is available on Saxo News & Research or as a result of the use of the Saxo News & Research. Orders given and trades effected are deemed intended to be given or effected for the account of the customer with the Saxo Bank Group entity operating in the jurisdiction in which the customer resides and/or with whom the customer opened and maintains his/her trading account. Saxo News & Research does not contain (and should not be construed as containing) financial, investment, tax or trading advice or advice of any sort offered, recommended or endorsed by Saxo Bank Group and should not be construed as a record of our trading prices, or as an offer, incentive or solicitation for the subscription, sale or purchase in any financial instrument. To the extent that any content is construed as investment research, you must note and accept that the content was not intended to and has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such, would be considered as a marketing communication under relevant laws.

Recommended Content


Recommended Content

Editors’ Picks

EUR/USD holds sizeable gains near 1.0900 on German fiscal optimism

EUR/USD holds sizeable gains near 1.0900 on German fiscal optimism

EUR/USD holds sizeable near 1.0900 in European trading on Tuesday. Improved risk appetite, sustained US Dollar weakness and German Greens predicting a spending deal this week power the pair's upsurge ahead of US JOLTs data and US-Ukraine Summit.

EUR/USD News
GBP/USD extends gains above 1.2900 amid sustained US Dollar weakness

GBP/USD extends gains above 1.2900 amid sustained US Dollar weakness

GBP/USD extends gains above 1.2900 in the European sessopn on Tuesday. The pair advances as the US Dollar remains pressured amid Trump's tariffs uncertainty and US recession fears. All eyes remain on the US jobs data and US-Ukraine Summitt for further impetus.  

GBP/USD News
Gold price climbs further beyond $2,900; reverses major part of Monday's fall to one-week low

Gold price climbs further beyond $2,900; reverses major part of Monday's fall to one-week low

Gold price builds on its intraday ascent beyond the $2,900 mark, hitting a fresh daily high during the first half of the European session and reversing a major the previous day's losses to a one-week low. Investors remain worried about the potential economic fallout from US President Donald Trump's trade tariffs and persistent geopolitical risks.

Gold News
The crypto market cap dips to $2.44 trillion while Mt. Gox moves 11,833 BTC worth $932 million

The crypto market cap dips to $2.44 trillion while Mt. Gox moves 11,833 BTC worth $932 million

The crypto market continued its ongoing downleg as the week started, as its market cap capitalization reached a low of $2.44 trillion on Tuesday, levels not seen since early November.

Read more
Gold price climbs further beyond $2,900; reverses major part of Monday's fall to one-week low

Gold price climbs further beyond $2,900; reverses major part of Monday's fall to one-week low

Gold price builds on its intraday ascent beyond the $2,900 mark, hitting a fresh daily high during the first half of the European session and reversing a major the previous day's losses to a one-week low. Investors remain worried about the potential economic fallout from US President Donald Trump's trade tariffs and persistent geopolitical risks.

Gold News
The Best brokers to trade EUR/USD

The Best brokers to trade EUR/USD

SPONSORED Discover the top brokers for trading EUR/USD in 2025. Our list features brokers with competitive spreads, fast execution, and powerful platforms. Whether you're a beginner or an expert, find the right partner to navigate the dynamic Forex market.

Read More

Majors

Cryptocurrencies

Signatures

Best Brokers of 2025