Japanese Yen edges lower due to rising confusion over BoJ policy outlook
- The Japanese Yen loses ground as the BoJ’s Summary of Opinions signals its intention to maintain an accommodative monetary stance.
- The JPY struggled as Japan’s upcoming PM Ishiba stated the need to maintain low rates to help economic recovery.
- The US Dollar receives support as traders adopt caution amid rising geopolitical tension in the Middle East.
The Japanese Yen (JPY) edges lower against the US Dollar (USD) on Wednesday as rising doubts over further interest rate hikes by the Bank of Japan (BoJ). 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.
Japan’s upcoming Prime Minister Shigeru Ishiba stated on Sunday that the country’s monetary policy should continue to be accommodative, indicating the necessity of maintaining low borrowing costs to support a fragile economic recovery. This has put pressure on the Japanese Yen and underpinned the USD/JPY pair.
The US Dollar receives support from the cautious mood in the market amid the escalating tension in the Middle East. However, the weaker-than-expected ISM Manufacturing PMI for September might have put downward pressure on the Greenback. Traders will now focus on the upcoming US ADP Employment Change and Fedspeak for further direction.
Daily Digest Market Movers: Japanese Yen depreciates due to waning odds of BoJ’s rate hikes
- The CME FedWatch Tool indicates that markets are assigning a 63.1% probability to a 25 basis point rate cut by the Federal Reserve in November, while the likelihood of a 50-basis-point is 36.9%, down from 58.2% a week ago.
- Iran launched over 200 ballistic missiles at Israel, prompting Prime Minister Benjamin Netanyahu to vow retaliation against Tehran for the Tuesday attack. In response, Iran warned that any counterstrike would lead to “vast destruction,” heightening concerns of a broader conflict.
- US ISM Manufacturing PMI came at 47.2 for September, matching the reading with August’s print but came in below the market expectation of 47.5.
- Japan’s Tankan Large Manufacturing Index showed that overall business conditions for large manufacturing companies remained steady at 13 points in the third quarter, in line with expectations. Additionally, Japan’s Unemployment Rate fell to 2.5% in August, down from 2.7% in July, which was better than market forecasts of 2.6%, data showed on Tuesday.
- Federal Reserve (Fed) Chairman Jerome Powell said on Monday the central bank is not in a hurry and will lower its benchmark rate ‘over time.’ Fed Chair Powell added that the recent 50 basis point interest rate cut should not be seen as an indication of similarly aggressive future actions, noting that upcoming rate changes are likely to be more modest.
- St. Louis Federal Reserve President Alberto Musalem stated on Friday, according to the Financial Times, that the Fed should begin cutting interest rates “gradually” following a larger-than-usual half-point reduction at the September meeting. Musalem acknowledged the possibility of the economy weakening more than anticipated, saying, “If that were the case, then a faster pace of rate reductions might be appropriate.”
- Last week, the BoJ Monetary Policy Meeting Minutes expressed the members’ consensus on the importance of remaining vigilant regarding the risks of inflation exceeding targets. Several members indicated that raising rates to 0.25% would be suitable as a way to adjust the level of monetary support. A few others suggested that a moderate adjustment to monetary support would also be appropriate.
Technical Analysis: USD/JPY remains above 143.50, nine-day EMA
USD/JPY trades around 143.80 on Wednesday. Analysis of the daily chart indicates that the pair consolidates within an ascending channel pattern, suggesting a bullish bias. The 14-day Relative Strength Index (RSI) also hovers slightly below the 50 level. A breakout above this threshold could further confirm the bullish trend’s continuation.
The USD/JPY pair may encounter resistance near the upper boundary of the ascending channel at 146.80, followed by the five-week high of 147.21, last reached on September 3.
On the downside, immediate support appears at the nine-day Exponential Moving Average (EMA) around 143.50, followed by the lower boundary of the ascending channel at 143.00. A break below this level could push the USD/JPY pair toward the 139.58 level, marking the lowest 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 weakest against the New Zealand Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.05% | -0.06% | 0.14% | -0.07% | -0.23% | -0.33% | -0.07% | |
| EUR | 0.05% | -0.02% | 0.22% | -0.05% | -0.19% | -0.28% | -0.02% | |
| GBP | 0.06% | 0.02% | 0.19% | -0.03% | -0.17% | -0.27% | -0.00% | |
| JPY | -0.14% | -0.22% | -0.19% | -0.16% | -0.38% | -0.49% | -0.22% | |
| CAD | 0.07% | 0.05% | 0.03% | 0.16% | -0.17% | -0.26% | 0.00% | |
| AUD | 0.23% | 0.19% | 0.17% | 0.38% | 0.17% | -0.10% | 0.17% | |
| NZD | 0.33% | 0.28% | 0.27% | 0.49% | 0.26% | 0.10% | 0.27% | |
| CHF | 0.07% | 0.02% | 0.00% | 0.22% | -0.00% | -0.17% | -0.27% |
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.