USD/JPY weakens below 152.00, US NFP data in focus

USD/JPY edges lower to 151.95 in Friday’s Asian session.
The BoJ leaves the door open for a near-term rate hike.
Investors await the US NFP data, which is due later on Friday.

The USD/JPY pair softens to around 151.95 during the Asian trading hours on Friday. The Japanese Yen (JPY) edges higher after Bank of Japan (BoJ) Governor Kazuo Ueda’s remarks, which were interpreted as heightening the chance of a rate hike in December.

The Bank of Japan (BoJ) decided to keep short-term interest rates at 0.25% at its two-day meeting on Thursday. The central bank projected inflation would move around its 2% target in the coming years. "Looking at domestic data, wages and prices are moving in line with our forecasts. As for downside risks to the US and overseas economies, we're seeing clouds clear a bit," said BoJ Governor Kazuo Ueda. The less dovish remarks from the BoJ officials are likely to underpin the JPY in the near term.

The US October Nonfarm Payrolls (NFP) data will be the highlight on Friday. The US economy is estimated to added 113K job additions in October, while the Unemployment Rate is expected to remain steady at 4.1%. In case of the weaker-than-expected data, this could prompt Federal Reserve (Fed) dovish bets, exerting some selling pressure on the Greenback.

Bank of Japan FAQs

What is the Bank of Japan?

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%.

What has been the Bank of Japan’s policy?

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.

How do Bank of Japan’s decisions influence the Japanese Yen?

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.

Why did the Bank of Japan decide to start unwinding its ultra-loose policy?

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.

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