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Japanese Yen bulls seem non-committed ahead of BoJ Governor Ueda’s press conference

  • The Japanese Yen turned higher after the BoJ decided to leave interest rates unchanged on Tuesday.
  • Traders now look forward to BoJ Governor Kazuo Ueda’s remarks for some meaningful impetus.
  • The mixed fundamental backdrop warrants some caution before placing fresh JPY bullish bets.

The Japanese Yen (JPY) attracts some intraday buyers following the Bank of Japan’s (BoJ) decision to keep the short-term interest rate target at 0.50% earlier this Tuesday. The JPY, for now, seems to have snapped a two-day losing streak against its American counterpart and draws additional support from rising geopolitical tensions in the Middle East. The JPY bulls, however, seem reluctant amid expectations that the BoJ could postpone the rate hike to Q1 next year due to uncertainty over US tariff policy.

Hence, traders will closely scrutinize comments from BoJ Governor Kazuo Ueda for cues about the policy outlook, which, in turn, will play a key role in influencing the near-term JPY price dynamics. In the meantime, news that the US and Japan failed to reach a trade deal at the G-7 summit contributes to capping the JPY and warrants some caution for bulls. Hence, it will be prudent to wait for strong follow-through buying before positioning for the resumption of the recent well-established uptrend.

Japanese Yen retains neutral bias after BoJ decision, amid trade uncertainty

  • The Bank of Japan, as was widely anticipated, decided to leave policy rate unchanged at the end of the June policy meeting this Tuesday. BoJ will reduce its monthly outright JGB purchases to about ¥2 trillion in January-March 2027. The amount will be cut down by ~¥400 billion each calendar quarter until January-March 2026 and then by ~¥200 billion each calendar quarter from April-June 2026
  • The Japanese Yen moves little after the announcement amid expectations that the Bank of Japan might forego another rate hike this year amid trade uncertainties. Japan’s Prime Minister Shigeru Ishiba and US President Donald Trump failed to achieve a breakthrough on tariffs at the Group of Seven summit.
  • Ishiba wants Trump to eliminate 25% duties on Japanese vehicles and 24% reciprocal levies on other Japanese imports, which have been suspended until July 9.“There are still some points on which the two sides are not on the same page, so we have not yet reached an agreement on the trade package,” Ishiba told reporters.
  • Meanwhile, Japan’s Finance Minister Katsunobu Kato said that there is no fixed plan right now to hold further talks with US Treasury Secretary Scott Bessent. Kato further added that higher oil prices and a lower JPY are not a favorable combination for the Japanese economy as the country is a very large importer of energy.
  • The Bank of Japan will announce its policy decision later today and is widely expected to maintain short-term interest rates at 0.5%. Furthermore, BoJ Governor Kazuo Ueda is likely to signal readiness to continue interest rate hikes as the escalating Iran-Israel conflict could boost crude oil prices and disturb the price outlook.
  • The market focus will also be on the board’s review of an existing bond-tapering plan running through the end of the current fiscal year, and a new program that will extend through fiscal 2026. The BoJ will consider slowing reductions in its bond purchases next year under a quantitative tightening (QT) plan.
  • On the geopolitical front, the deadly conflict between Israel and Iran has entered its fifth day, with both sides widening their attacks. Trump, in a Truth Social post, warned Iranians to “immediately evacuate Tehran”. A White House official said that the post reflected the urgency of the need for Iran to come to the table for talks.
  • Investors this week will further evaluate the Federal Reserve’s latest monetary policy update for more cues about the future rate-cut path. This, in turn, will help in determining the next leg of a directional move for the US Dollar and the USD/JPY pair.

USD/JPY fails to build on intraday uptick beyond the 145.00 psychological mark

From a technical perspective, sustained strength and acceptance above the 145.00 psychological mark will confirm a bullish breakout through a multi-week-old trading range. Given that oscillators on the daily chart have just started gaining positive traction, the USD/JPY pair might then surpass the monthly swing high, around the 145.45 region, and aim to conquer the 146.00 round figure. The momentum could extend further towards the 146.25-146.30 region, or the May 29 peak. 

On the flip side, any corrective slide now seems to find some support near the 144.50-144.45 region ahead of the 144.00 mark. A convincing break below the latter could drag the USD/JPY pair to the 143.55-143.50 intermediate support en route to the 143.00 round figure and last Friday’s swing low, around the 142.80-142.75 region. This is followed by the lower boundary of the trading range, around mid-142.00s, which if broken would set the stage for the resumption of the downtrend from the May monthly swing high.

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.