USD/JPY steadies ahead of BoJ Ueda’s remarks
- USD/JPY remains capped below former psychological support, now resistance, at 144.00.
- BoJ Governor Ueda to address “New Challenges for Monetary Policy” conference on Tuesday, with markets watching for policy clues.
- The US Dollar remains vulnerable as potential hawkish signals from the BoJ could drive renewed Yen strength.
USD/JPY is attempting a mild recovery after last week’s sell-off in the United States (US) bond market dragged the pair below the key psychological level of 144.00.
The move lower was driven by rising US Treasury yields and a broader risk-off tone. With the pair now trading below 143.00 at the time of writing, attention shifts to monetary policy cues and safe-haven flows to determine the next directional bias.
On Tuesday, Bank of Japan (BoJ) Governor Kazuo Ueda is scheduled to deliver opening remarks at the 2025 BoJ–Institute for Monetary and Economic Studies (IMES) Conference in Tokyo.
The event, which draws global central bankers and economists, will focus on the theme “New Challenges for Monetary Policy.” Ueda’s comments will be scrutinized for any signals on the BoJ’s policy outlook, particularly as inflation in Japan remains elevated and wage growth shows signs of sustainability.
For decades, the BoJ maintained an ultra-loose monetary stance, keeping interest rates near zero in a bid to spur domestic demand and escape deflation. In contrast, the US Federal Reserve (Fed) has maintained a restrictive policy framework, holding rates at multi-decade highs to tame persistent inflation.
However, the monetary policy divergence narrative is starting to show signs of strain. Investors are beginning to question the resilience of the US Dollar (USD) amid mounting fiscal concerns, credit rating pressures, and recent softening in economic data. Markets are now pricing in the potential for Fed rate cuts later this year, reflecting a shift in expectations that could further pressure the Greenback.
In this evolving landscape, the Japanese Yen (JPY) has regained its appeal as a traditional safe-haven asset. While the Greenback remains the world’s primary reserve currency, rising concerns about US fiscal discipline and political instability have weighed on USD sentiment in recent weeks. Should Ueda adopt a more hawkish tone, hinting at further policy normalization or tightening, such a shift could lift the Yen by narrowing rate differentials and reinforcing investor confidence in the Japanese Yen.
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.
Author
Tammy Da Costa, CFTe®
FXStreet
Tammy is an economist and market analyst with a deep passion for financial markets, particularly commodities and geopolitics.
