USD/JPY hits six-week lows sub 147.00 as of BoJ tightening bets rise

The US Dollar extended losses to the 147.00 level against the Yen after dropping nearly 2% in the last four days.
The US government shutdown and grey US employment data have crushed the US Dollar this week.
In Japan, a hawkish BoJ and resilient business sentiment data are feeding hopes of an immediate interest rate hike.

Guillermo Alcala FXStreet

The US Dollar is heading lower for the fourth consecutive day against the Japanese Yen on Wednesday, testing six-week lows near the 147.00 level, hammered by a combination of market concerns about the US government closure and a hawkishly tilted Bank of Japan’s monetary policy minutes.

The BoJ’s Summary of Opinions, released on Tuesday, revealed that some policymakers suggested that the time for further monetary tightening might be approaching, which boosted expectations of a rate hike in October or December.

Japanese manufacturers' sentiment improved again in Q2

Later on Tuesday, the Japanese Tankan Survey provided further support for this theory. Business sentiment among Japanese large manufacturers improved for the second consecutive quarter, although at a lesser-than-expected extent, and concerns about a negative impact from Trump’s tariffs eased.

In the US, on the other hand, a lacklustre US JOLTS Job openings report and the closure of the US Government heightened expectations that the Fed will have to provide further support to the labour market, which added pressure on the US Dollar.

Later today, the focus will be on the US ADP report and the ISM Manufacturing PMI, which are likely to provide further clues about the Federal Reserve’s near-term monetary policy decisions.

Economic Indicator

Tankan Large Manufacturing Index

The Tankan Large Manufacturing Index released by the Bank of Japan presents overall business conditions of the large manufacturing companies in Japan. It is an indicator of the Japanese economy as Japan heavily relies on the manufacturing industry that leads growth for the export-oriented economy. A result above the 0 level is seen as positive (or bullish) for the JPY, whereas a result below 0 is seen as negative (or bearish).

Economic Indicator

Tankan Large All Industry Capex

The Tankan Large All Industry Capital Expenditure released by the Bank of Japan measures capital expenditure (capex) of all the Japanese industries except the financial industry. The Capex is considered as an early indicator of productively growth. A high reading is seen as positive (or bullish) for the JPY, while a low reading is seen as negative (or bearish).

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