Yen trails the majors as the BoJ is said to lean against a hike
- USD/JPY dips under 158.00 on the BoJ report, then climbs back near 158.50.
- Traders put an October BoJ hike near 10% and one by December near 88%.
- Japan has no data of note this week, and US inflation comes on Wednesday.
The Dollar fell against every major currency on Tuesday and fell least against the Yen, on the day the Bank of Japan (BoJ) was reported to be leaning against an October rate hike. USD/JPY jumped to just under 158.50 on the report and fell to just under 158.00 within three five-minute bars, then climbed back near 158.50 as US bond yields rose.
Bloomberg reported that BoJ officials are inclined to skip a second straight hike at the October 30 meeting and keep December open, after raising the rate to 1.25% on September 18. Overnight swaps, the contracts traders use to bet on the BoJ's rate, put the odds near 10% for October and 88% by December. The BoJ's own survey, published on Tuesday, showed households expect prices to rise 11.8% on average over the next year.
The Fed's rate is 3.75%-4.00% against the BoJ's 1.25%, and the 10-year Treasury yield near 5.2% is about 2.2 points above Japan's 10-year at 3.0%. A BoJ that waits until December leaves that gap alone, and USD/JPY climbed back as the Treasury yield rose once US trading began.
On the calendar
Japan has nothing on its data calendar this week likely to move the Yen, and the BoJ doesn't decide until October 30. Finance Minister Katayama and US Treasury Secretary Bessent are both at the International Monetary Fund (IMF) meetings in Bangkok, which run through Saturday, and the last time their governments bought Yen together, on July 31, USD/JPY was near 164.00.
The US side carries the scheduled news: September consumer prices on Wednesday, forecast up 0.6% in the month after 0.4%, producer prices and retail sales on Thursday, and Fed Chair Warsh on Friday. Each one feeds the Treasury yield that USD/JPY followed back up on Tuesday.
On the charts
Tuesday's low dipped under the 50-day Exponential Moving Average (EMA) near 158.00 and stopped about a tenth of a yen above the 200-day EMA, with the two averages about a third of a yen apart. USD/JPY hasn't traded above 159.00 since September 24, and every session since October 5 has stayed between roughly 157.50 and 159.00.
USD/JPY daily chart
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.
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