USD/JPY holds losses below 147.50 ahead of Q2 US GDP Annualized
- USD/JPY struggles as the Japanese Yen receives support from recent hawkish comments from BoJ Governor Kazuo Ueda.
- BoJ’s Nakagawa said the bank will gather data before meetings to avoid falling behind the curve.
- Fed’s John Williams said that rates will likely be lowered at some point, though, assessing upcoming data first.
USD/JPY depreciates after registering a steady previous session, trading around 147.30 during the European hours on Thursday. The pair loses ground as the Japanese Yen (JPY) gains ground, driven by recent comments from the Bank of Japan (BoJ) Governor Kazuo Ueda. Ueda said that wage hikes are spreading beyond large firms and are likely to keep accelerating due to a tightening job market, boosting market hopes of a further interest rate hike in the coming months.
BoJ monetary policy board member Junko Nakagawa said on Thursday that the central bank will gather information as much as possible ahead of every policy meeting to avoid falling behind the curve, given solid wage growth over the last several years. Earlier in the day, Nakagawa stated, “If its outlook for economic activity and prices is realized, BoJ will continue to raise the policy interest rate.”
Reuters reported on Thursday that Japan's trade negotiator Ryosei Akazawa has canceled a visit to the United States (US) this week. The visit aimed to discuss the financial details of Tokyo's $550 billion investment package in return for reduced tariffs on imports from the world’s fourth-largest economy.
However, the downside of the USD/NZD pair could be restrained as the US Dollar (USD) holds ground amid rising odds of US Federal Reserve (Fed) interest rate cuts. Traders await the Q2 US Gross Domestic Product (GDP) Annualized due later on Thursday. Focus will shift toward July Personal Consumption Expenditures (PCE) Price Index data, the Fed's preferred inflation gauge.
New York Fed President John Williams stated on Wednesday that interest rates will likely decrease at some point, but policymakers will need to review upcoming economic data before September's policy decision.
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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