Japanese Yen retains its neutral bias amid mixed BoJ rate hike cues, rising geopolitical tensions
- The Japanese Yen struggles for a firm intraday direction following the crucial BoJ policy decision.
- Rising geopolitical tensions and relatively hawkish BoJ expectations act as a tailwind for the JPY.
- The mixed fundamental backdrop warrants some caution before placing fresh JPY bearish bets.
The Japanese Yen (JPY) extends the intraday sideways consolidative price move and trades flat against its American counterpart as the Bank of Japan's (BoJ) post-meeting press conference gets underway. Expectations that the BoJ might forego another interest rate hike this year due to uncertainty over US tariff policy, along with news that the US and Japan failed to reach a trade deal at the G-7 summit, act as a headwind for the JPY.
Traders, however, are still pricing in the possibility that the BoJ will hike interest rates during the first quarter of 2026. This, along with rising geopolitical tensions in the Middle East, acts as a tailwind for the safe-haven JPY. The US Dollar (USD), on the other hand, languishes near a three-year low amid bets that the Federal Reserve (Fed) would lower borrowing costs further in 2025. This contributes to capping the USD/JPY pair.
Japanese Yen remains on the defensive amid diminishing odds for a BoJ rate hike in 2025
- The Bank of Japan, as was widely anticipated, decided to leave policy rate unchanged at the end of the June policy meeting this Tuesday. BoJ will reduce its monthly outright JGB purchases to about ¥2 trillion in January-March 2027. The amount will be cut down by ~¥400 billion each calendar quarter until January-March 2026 and then by ~¥200 billion each calendar quarter from April-June 2026.
- Addressing the post-meeting press conference, BoJ Governor Kazuo Ueda said that the bond tapering decision is not so much about fiscal considerations but mainly to avoid excessive volatility from negatively impacting the economy. Ueda added that further rate hike depends on the likelihood of achieving the central bank's outlook.
- The Japanese Yen moves little in reaction to the latest policy updated amid expectations that the Bank of Japan might forego another rate hike this year amid trade uncertainties. In fact, Japan's Prime Minister Shigeru Ishiba and US President Donald Trump failed to achieve a breakthrough on tariffs at the Group of Seven summit.
- Ishiba wants Trump to eliminate 25% duties on Japanese vehicles and 24% reciprocal levies on other Japanese imports, which have been suspended until July 9.“There are still some points on which the two sides are not on the same page, so we have not yet reached an agreement on the trade package,” Ishiba told reporters.
- Meanwhile, Japan's Finance Minister Katsunobu Kato said that there is no fixed plan right now to hold further talks with US Treasury Secretary Scott Bessent. Kato further added that higher oil prices and a lower JPY are not a favorable combination for the Japanese economy as the country is a very large importer of energy.
- On the geopolitical front, the deadly conflict between Israel and Iran has entered its fifth day, with both sides widening their attacks. Trump, in a Truth Social post, warned Iranians to “immediately evacuate Tehran”. A White House official said that the post reflected the urgency of the need for Iran to come to the table for talks.
- Investors this week will further evaluate the Federal Reserve's latest monetary policy update for more cues about the future rate-cut path. This, in turn, will help in determining the next leg of a directional move for the US Dollar and the USD/JPY pair.
USD/JPY bulls await breakout through a trading range hurdle, around 145.00
From a technical perspective, sustained strength and acceptance above the 145.00 psychological mark will confirm a bullish breakout through a multi-week-old trading range. Given that oscillators on the daily chart have just started gaining positive traction, the USD/JPY pair might then surpass the monthly swing high, around the 145.45 region, and aim to conquer the 146.00 round figure. The momentum could extend further towards the 146.25-146.30 region, or the May 29 peak.
On the flip side, any corrective slide now seems to find some support near the 144.50-144.45 region ahead of the 144.00 mark. A convincing break below the latter could drag the USD/JPY pair to the 143.55-143.50 intermediate support en route to the 143.00 round figure and last Friday's swing low, around the 142.80-142.75 region. This is followed by the lower boundary of the trading range, around mid-142.00s, which if broken would set the stage for the resumption of the downtrend from the May monthly swing high.
Japanese Yen PRICE This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.15% | 0.03% | 0.30% | -0.06% | -0.84% | -0.84% | 0.16% | |
| EUR | 0.15% | 0.06% | 0.44% | 0.10% | -0.57% | -0.69% | 0.32% | |
| GBP | -0.03% | -0.06% | 0.39% | 0.03% | -0.63% | -0.75% | 0.24% | |
| JPY | -0.30% | -0.44% | -0.39% | -0.36% | -1.44% | -1.46% | -0.55% | |
| CAD | 0.06% | -0.10% | -0.03% | 0.36% | -0.71% | -0.79% | 0.21% | |
| AUD | 0.84% | 0.57% | 0.63% | 1.44% | 0.71% | -0.11% | 0.90% | |
| NZD | 0.84% | 0.69% | 0.75% | 1.46% | 0.79% | 0.11% | 1.00% | |
| CHF | -0.16% | -0.32% | -0.24% | 0.55% | -0.21% | -0.90% | -1.00% |
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).
Author
Haresh Menghani
FXStreet
Haresh Menghani is a detail-oriented professional with 10+ years of extensive experience in analysing the global financial markets.
