Japanese Yen languishes near one-week low vs. USD ahead of BoJ presser
|- Japanese Yen continues with its relative underperformance amid concerns about Japan’s fiscal health.
- The BoJ decided to leave short-term rates on hold and did little to provide any impetus to the JPY.
- Intervention fears could limit JPY losses amid a bearish USD, ahead of BoJ Governor Ueda's presser.
The Japanese Yen (JPY) remains depressed near the weekly low against its American counterpart following the Bank of Japan's (BoJ) widely expected decision to leave short term rate on hold. Traders, however, refrain from placing fresh bets and opt to wait for cues about the likely timing of further policy tightening. Hence, BoJ Governor Kazuo Ueda's remarks during the post-decision press conference will play a key role in influencing the near-term JPY price dynamics.
In the meantime, domestic political uncertainty, along with concerns about Japan's fiscal health and the upbeat market mood, continues to undermine the safe-haven JPY. Apart from this, a modest US Dollar (USD) uptick acts as a tailwind for the USD/JYP pair. However, expectations that government authorities could intervene to stem further weakness in the domestic currency warrant some caution for the JPY bears and before positioning for any further downfall.
Japanese Yen retains bearish bias amid political uncertainty, fiscal concerns
- As was widely expected, the Bank of Japan board members decided to maintain the short-term interest rate at 0.75%, following the conclusion of the two-day monetary policy review meeting on Friday.
- The spotlight now turns to BoJ Governor Kazuo Ueda's post-decision press conference, which determine the near-term trajectory for the Japanese Yen and provide a fresh impetus to the USD/JPY pair.
- Data released earlier today showed that Japan's National Consumer Price Index fell from the 2.9% YoY rate to 2.1% in December, while CPI excluding fresh food arrived at 2.4% compared to the 3.0% in November.
- Additional details revealed that the National CPI excluding fresh food and energy slowed to the 2.9% YoY rate in December from 3.0% in the previous month, though it remains well above the BoJ's 2% annual target.
- The data reaffirms market expectations of further BoJ policy tightening. Moreover, a private-sector survey showed that Japan's manufacturing activity expanded in January for the first time in seven months.
- In fact, the S&P Global flash Japan manufacturing PMI rose to 51.5 in January, or its highest level since August 2024. Adding to this, the gauge for the service sector also picked up and rose to 52.8 from 51.1.
- Japan's Prime Minister Sanae Takaichi will dissolve parliament on Friday ahead of a snap election on February 8, hoping for a stronger mandate to push through her ambitious fiscally expansionary policies.
- Investors, however, gave a thumbs down to Takaichi’s proposal to cut the 8% food consumption tax for two years, which led to the recent free fall in government bonds and continues to weigh on the JPY.
- Geopolitical tensions eased dramatically after US President Donald Trump announced on Wednesday a potential deal with NATO involving Greenland, further undermining the JPY's safe-haven status.
- Meanwhile, hawkish BoJ expectations mark a significant divergence in comparison to the growing acceptance that the US Federal Reserve will lower borrowing costs at least two more times this year.
- Apart from this, the broader de-dollarization trend offsets Thursday's upbeat US data and dragged the US Dollar back closer to a two-week low, which might further contribute to capping the USD/JPY pair.
USD/JPY could accelerate move up once ascending channel hurdle is cleared
The 100-hour Simple Moving Average (SMA) edges higher at 158.16, and the USD/JPY pair holds above it, keeping the near-term tone bullish. The Moving Average Convergence Divergence (MACD) line sits marginally below the Signal line around the zero mark, with a small negative histogram that reinforces a cautious momentum backdrop. The Relative Strength Index (RSI) prints 56, slightly above the midline, suggesting steady buying interest. The ascending channel from 157.35 supports the uptrend, with resistance near 158.91. A decisive break could extend gains.
Price action respects the ascending structure, while the 100-period SMA continues to rise at 158.16 and acts as nearby support. The MACD remains below the Signal line and just under the zero level, while the negative histogram contracts, suggesting fading bearish pressure that could give way to renewed upside if momentum improves. RSI improves toward 56 from the mid-40s, aligning with stabilizing buying interest. Initial support stands near the lower channel boundary at 157.96. A failure to hold the channel floor would shift attention to downside risks.
(The technical analysis of this story was written with the help of an AI tool.)
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.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.