- The Japanese Yen edges lower as BoJ leaves interest rates unchanged at 0% on Friday.
- Policymakers intend to finalize a plan for decreasing bond buying at the next meeting.
- The US Dollar maintains its stability despite weaker-than-expected economic data released on Thursday.
The Japanese Yen (JPY) edges lower on Friday after the Bank of Japan (BoJ) decides to keep its interest rate at 0% at the conclusion of its June policy meeting. The BoJ held rates for the second straight meeting after hiking for the first time since 2007 in March. The central bank did decide to reduce bond purchases, however, aiming to give long-term interest rates greater flexibility. Policymakers sad they intend to finalize a plan for decreasing bond buying over the next 1-2 years to be confirmed at their next policy meeting.
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 current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
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 supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
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.
The US Dollar Index (DXY), meanwhile, which measures the value of the US Dollar (USD) against six major currencies, edges higher despite the release of weaker-than-expected economic data on Thursday. The US Producer Price Index (PPI) came in softer, and Initial Jobless Claims were higher than anticipated. Nevertheless, the USD's strength can be attributed to the hawkish stance of the US Federal Reserve (Fed).
Federal Open Market Committee (FOMC) policymakers have adjusted their outlook, now projecting only one rate cut for the year, compared to the three cuts forecasted in March. This revised expectation indicates a more aggressive approach to managing inflation and maintaining economic stability, contributing to the USD's resilience. Investors now await the preliminary US Michigan Consumer Sentiment Index, set to be released on Friday. This index will provide further insights into consumer confidence and economic outlook.
Daily Digest Market Movers: Japanese Yen declines due to a dovish BoJ
- BoJ Governor Kazuo Ueda addressed the post-policy meeting press conference on Friday that the central bank “decided to reduce JGB purchases to ensure long-term yields are formed more freely in markets.”
- Japanese Finance Minister Shunichi Suzuki said on Friday that he aims to achieve the primary balance goal. Suzuki further stated that he will keep an eye on China's excess production on the Japanese economy, per Reuters.
- US Initial Jobless Claims for the week ending June 7 showed a significant increase, with the number of claims rising by 13,000 to 242,000. This figure surpassed market expectations, which were set at 225,000, marking the highest level of jobless claims since August 2023.
- US Producer Price Index (PPI) came in weaker than expected, increasing 2.2% YoY in May, compared to the 2.3% rise in April (revised from 2.2%). Meanwhile, the core PPI figure rose 2.3% YoY in May, below the consensus and April’s reading of 2.4%.
- The Federal Open Market Committee (FOMC) left its benchmark lending rate in the range of 5.25%–5.50% for the seventh consecutive time in its policy meeting on Wednesday, as widely anticipated. In a press conference following the Fed's decision, Fed Chair Jerome Powell remarked that the restrictive stance on monetary policy is producing the expected effects on inflation.
- Japan Finance Minister Shunichi Suzuki said on Tuesday it is important to continue efforts to achieve economic growth and attain fiscal health to retain confidence in the country's fiscal policy, per Reuters.
- According to Reuters, while speaking to parliament last week, Bank of Japan (BoJ) Governor Kazuo Ueda stated that inflation expectations are gradually rising but have yet to reach 2%. "We have been scrutinizing market developments since the March decision. As we proceed to exit our massive monetary stimulus, it's appropriate to reduce bond purchases," Ueda said.
Technical Analysis: USD/JPY moves above 157.50
USD/JPY trades around 157.90 on Friday. Analyzing the daily chart shows a bullish bias, with the pair consolidating within an ascending channel pattern. This pattern typically indicates a continuation of the upward trend, suggesting that the price is likely to keep rising as long as it remains within the channel.
The USD/JPY pair could face an immediate hurdle at the psychological level of 158.00. If the pair breaks above 158.00, the next target is around the upper boundary of the ascending channel near 159.20. The level of 160.32, marked in April as the highest level in over thirty years, represents a major resistance.
On the downside, the support appears at the lower boundary of the ascending channel around the 50-day Exponential Moving Average (EMA) at 155.18. A breach below this level could intensify downward pressure on the USD/JPY pair, potentially driving it toward the throwback support area around 152.80.
USD/JPY: Daily Chart
Japanese Yen price in the last 7 days
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies in the last 7 days. Japanese Yen was the weakest against the US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 1.62% | 0.48% | 0.63% | 0.84% | 1.45% | 0.96% | 0.52% | |
| EUR | -1.64% | -1.16% | -1.00% | -0.81% | -0.20% | -0.68% | -1.13% | |
| GBP | -0.49% | 1.14% | 0.16% | 0.34% | 0.96% | 0.47% | 0.03% | |
| CAD | -0.62% | 1.01% | -0.13% | 0.22% | 0.82% | 0.34% | -0.11% | |
| AUD | -0.84% | 0.81% | -0.34% | -0.21% | 0.62% | 0.14% | -0.33% | |
| JPY | -1.46% | 0.17% | -1.01% | -0.86% | -0.65% | -0.51% | -0.94% | |
| NZD | -0.97% | 0.67% | -0.48% | -0.33% | -0.14% | 0.47% | -0.45% | |
| CHF | -0.51% | 1.11% | -0.03% | 0.11% | 0.31% | 0.93% | 0.45% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
Economic Indicator
BoJ Interest Rate Decision
The Bank of Japan (BoJ) announces its interest rate decision after each of the Bank’s eight scheduled annual meetings. Generally, if the BoJ is hawkish about the inflationary outlook of the economy and raises interest rates it is bullish for the Japanese Yen (JPY). Likewise, if the BoJ has a dovish view on the Japanese economy and keeps interest rates unchanged, or cuts them, it is usually bearish for JPY.
Read more.Last release: Fri Jun 14, 2024 03:23
Frequency: Irregular
Actual: 0%
Consensus: -
Previous: 0%
Source: Bank of Japan
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