USD/JPY steadies above 156.00 following BoJ’s Summary of Opinions
- USD/JPY steadies above 156.00 after pulling back from 156.60 highs.
- A hawkish BoJ's Summary of Opinions provided some support to the JPY earlier on Monday.
- The Fed's minutes, due on Tuesday, might give a further impulse to the pair.
The US Dollar is ticking lower against a moderately firmer Japanese Yen on Monday, yet with downside attempts contained above 156.00. The positive impact from the hawkishly-tilted Summary of Opinions of the Bank of Japan’s (BoJ) Monetary Policy Meeting seen during Monday’s Asian session has waned during London trading.
The Yen appreciated across the board after the Japanese central bank published the minutes of the last monetary policy meeting. BoJ policymakers observed that rates are still far from neutral, although some of them advised proceeding with caution to avoid undesired consequences on the economy and markets.
The Bank of Japan hiked its benchmark interest rate by 0.25% basis points to a 30-year high of 0.75% in December and signalled to further rate cuts in 2026 amid the bank’s overall commitment to monetary policy normalisation.
Investors, however, remain concerned about Japanese Prime Minister Sanae Takaichi’s pro-stimulus measures and their potential impact on an already stretched Japanese fiscal deficit. Fears of a debt crisis are acting as a significant headwind for a steady Yen recovery.
The US Dollar, on the other hand, remains weighed by market expectations that the US Federal Reserve will cut its benchmark rate at least two more times in 2026, against the bank’s projection of a single rate cut. On Tuesday, the release of the minutes of the December meeting is likely to shed further light on the topic, and might set the near-term direction of the USD/JPY pair.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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