Japanese Yen inches higher, upside seems limited due to waning likelihood of BoJ rate hike
- The Japanese Yen appreciates as the US Dollar remains tepid ahead of the US labor data release on Friday.
- Japan’s Economy Minister Akazawa stated that the timing of any monetary policy changes is crucial
- Traders await Friday’s US employment data, including Nonfarm Payrolls (NFP) and Average Hourly Earnings, for further direction.
The Japanese Yen (JPY) retraces recent gains following comments from Japan’s ministers on Friday. Newly appointed Economy Minister Ryosei Akazawa stated that Prime Minister Shigeru Ishiba and the Bank of Japan (BoJ) both agree that overcoming deflation is Japan's highest priority.
Economy Minister Akazawa added “No change to the interpretation of the government-Bank of Japan (BoJ) accord targeting 2% inflation.” The timing of monetary policy change is important and must align with Japan's broader goal of exiting deflation.
Japan's Chief Cabinet Secretary Yoshimasa Hayashi announced on Friday that Prime Minister Ishiba has directed the creation of a comprehensive economic package. Hayashi also mentioned that he plans to present a supplementary budget to Parliament following the lower house election.
However, the downside of the USD/JPY pair could be limited as the Japanese Yen may struggle due to the waning likelihood of further rate hikes by the Bank of Japan. Newly elected PM Ishiba stated on Wednesday, "I do not believe that we are in an environment that would require us to raise interest rates further," according to Reuters.
Daily Digest Market Movers: Japanese Yen receives downward pressure from dovish mood surrounding the BoJ
- The US Dollar (USD) gained strength following a better-than-expected US ISM Services PMI and ADP Employment Change reports, which challenged dovish expectations for Federal Reserve (Fed) monetary policy.
- The CME FedWatch Tool indicates that markets are assigning a 67.4% probability to a 25 basis point rate cut by the Federal Reserve in November, while the likelihood of a 50-basis-point cut is 32.6%, down from 35.2% a day ago.
- Federal Reserve Bank of Chicago President Austan Goolsbee reiterated on Thursday that the interest rates need to come down over the next year by “a lot.” Goolsbee further stated that he’d like to keep the unemployment rate at 4.2% and prevent it from rising any further.
- US ISM Services PMI rose to 54.9 in September, from 51.5 in August and exceeding the market forecast of 51.7. Meanwhile, the Services Prices Paid Index, a key inflation indicator, climbed to 59.4 from 57.3.
- Futures indicated less than a 50% likelihood of the Bank of Japan raising rates by 10 basis points by the end of 2024. Additionally, rates are projected to reach only 0.5% by the end of next year, up from the current 0.25%, per Reuters.
- BoJ board member Asahi Noguchi stated that the central bank "must patiently maintain loose monetary conditions." Noguchi indicated that the BoJ will likely make gradual adjustments to the level of monetary support while carefully assessing whether inflation sustainably reaches the 2% target, supported by wage growth.
- The ADP US Employment Change report showed an increase of 143,000 jobs in September, surpassing the forecasted 120,000 jobs. Additionally, annual pay rose by 4.7% year-over-year. The total number of jobs added in August was revised upward from 99,000 to 103,000.
- On Tuesday, BoJ’s Summary of Opinions from September’s Monetary Policy Meeting indicates no immediate plans for additional rate hikes. The central bank intends to maintain its accommodative stance but remains open to adjustments if economic conditions show significant improvement.
Technical Analysis: USD/JPY hovers near 146.50, five-week highs
USD/JPY trades around 146.50 on Friday. The daily chart analysis shows that the pair could attempt to break above the ascending channel pattern, indicating a strengthening bullish bias. Additionally, the 14-day Relative Strength Index (RSI) remains above the 50 mark, reinforcing the continuation of the bullish trend.
Regarding the upside, the USD/JPY pair is facing resistance close to the upper boundary of the ascending channel, near the five-week high of 147.21, which was last reached on September 3. A breakout above this level could enable the pair to test its seven-week high at 149.40.
In terms of downside, the USD/JPY pair may find support at the nine-day Exponential Moving Average (EMA) around 144.97, followed by the lower boundary of the ascending channel at 143.60. A drop below this level could push the pair toward 139.58, marking its lowest point since June 2023.
USD/JPY: Daily Chart
Japanese Yen PRICE Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the strongest against the Euro.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.04% | -0.03% | -0.40% | 0.01% | -0.13% | 0.01% | -0.09% | |
| EUR | -0.04% | -0.05% | -0.44% | -0.01% | -0.16% | -0.01% | -0.15% | |
| GBP | 0.03% | 0.05% | -0.35% | 0.08% | -0.12% | 0.04% | -0.11% | |
| JPY | 0.40% | 0.44% | 0.35% | 0.41% | 0.25% | 0.38% | 0.26% | |
| CAD | -0.01% | 0.00% | -0.08% | -0.41% | -0.16% | 0.02% | -0.16% | |
| AUD | 0.13% | 0.16% | 0.12% | -0.25% | 0.16% | 0.15% | -0.03% | |
| NZD | -0.01% | 0.01% | -0.04% | -0.38% | -0.02% | -0.15% | -0.16% | |
| CHF | 0.09% | 0.15% | 0.11% | -0.26% | 0.16% | 0.03% | 0.16% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
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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