- The Japanese Yen draws support from a combination of factors, albeit lacks follow-through.
- The USD remains depressed below a multi-month low and also exerts pressure on USD/JPY.
- Hawkish Fed expectations favour the USD bulls and should act as a tailwind for the major.
The Japanese Yen (JPY) remains on the front foot against its American counterpart on Wednesday, albeit lacks follow-through and remains well within the striking distance of the YTD low touched the previous day. Japan’s real wages fell for the 21st straight month in December and household spending dropped for a tenth consecutive month, which is seen as an unwelcome development for the Bank of Japan (BoJ). This, along with the underlying bullish tone across the global equity markets, holds back traders from placing fresh bullish bets around the safe-haven JPY.
Market participants, however, seem convinced that wage growth this year may outpace that of 2023 and pave the way for the BoJ to exit its decade-long ultra-loose monetary policy. Apart from this, the risk of a further escalation of geopolitical tensions in the Middle East and worries about slowing economic growth in China act as a tailwind for the JPY. This, along with the overnight pullback in the US Treasury bond yields, keeps the US Dollar (USD) below its highest level in almost three months touched earlier this week and weighs on the USD/JPY pair.
Meanwhile, the recent upbeat US macro data, including a blowout jobs report on Friday, pointed to a still resilient US economy and should allow the Federal Reserve (Fed) to keep interest rates higher for longer. Adding to this, the recent hawkish remarks by several Fed officials should act as a tailwind for the US bond yields and support prospects for the emergence of some USD dip-buying. This, in turn, warrants some caution before positioning for any meaningful decline for the USD/JPY pair ahead of Fedspeaks later during the North American session.
- The Japanese Yen draws support from hopes that another substantial pay hike this year will support sustained and stable inflation, and allow the Bank of Japan to pivot away from its ultra-dovish policy stance.
- Geopolitics, along with China’s economic woes, remain key risks for the markets, which benefits the safe-haven JPY and exerts pressure on the USD/JPY pair during the Asian session on Wednesday.
- The overnight sharp pullback in the US Treasury bond yields keeps the US Dollar bulls on the defensive and turns out to be another factor contributing to the mildly offered tone surrounding the major.
- Investors continue to scale back their expectations for early and steep rate cuts by the Federal Reserve in the wake of a resilient US economy and the recent hawkish remarks by influential FOMC members.
- Philadelphia Fed President Patrick Harker said on Tuesday that inflation must be moving sustainably lower to open rate cut door and that it would be a mistake to cut interest rates prematurely.
- Harker added that the recent news on inflation has been encouraging, though wage gains are still too high for getting to the 2% target and it is possible that inflation may be more persistent than expected.
- Separately, Minneapolis Fed President Neel Kashkari said that we are not done yet on inflation and most of the disinflationary gains have come from the supply-side, but the data is looking positive.
- This comes on top of Fed Chair Jerome Powell’s remarks on Sunday, saying that a strong economy gives the central bank time to evaluate if inflation will continue to fall before starting to cut interest rates.
- The yield on the benchmark 10-year US government bond holds above 4.0%, which supports prospects for the emergence of USD dip-buying and should act as a tailwind for the USD/JPY pair.
From a technical perspective, this week’s failure to find acceptance above the 148.80 level constitutes the formation of a bearish double-top pattern. That said, oscillators on the daily chart – though have been losing traction – are still holding in the positive territory and warrant some caution before positioning for deeper losses. That said, some follow-through selling below the 100-day Simple Moving Average (SMA), currently pegged near the 147.60-147.55 region, could drag the USD/JPY pair further towards the 147.00 round figure. A convincing break below the latter could accelerate the corrective decline further towards the 146.35 intermediate support en route to sub-146.00 levels, or the monthly low touched last week.
On the flip side, momentum back above the 148.00 mark now seems to confront some resistance near the 148.30-148.35 region. Bulls, meanwhile, are likely to wait for a sustained strength beyond the 148.80 double-top resistance before placing fresh bets. The USD/JPY pair might then surpass an intermediate hurdle near the 149.55-149.60 region and aim to reclaim the 150.00 psychological mark.
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 US Dollar.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | -0.07% | -0.06% | -0.09% | -0.16% | -0.06% | -0.17% | -0.04% | |
| EUR | 0.05% | 0.01% | -0.01% | -0.07% | 0.01% | -0.08% | 0.02% | |
| GBP | 0.06% | -0.02% | -0.04% | -0.08% | 0.01% | -0.10% | 0.02% | |
| CAD | 0.09% | 0.00% | 0.02% | -0.06% | 0.02% | -0.10% | 0.01% | |
| AUD | 0.13% | 0.06% | 0.07% | 0.05% | 0.07% | -0.04% | 0.09% | |
| JPY | 0.05% | -0.02% | 0.00% | -0.04% | -0.10% | -0.12% | -0.02% | |
| NZD | 0.17% | 0.09% | 0.10% | 0.06% | 0.01% | 0.10% | 0.10% | |
| CHF | 0.03% | -0.03% | -0.01% | -0.05% | -0.07% | 0.00% | -0.11% |
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 Euro from the left column and move along the horizontal line to the Japanese Yen, the percentage change displayed in the box will represent EUR (base)/JPY (quote).
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 has embarked in an ultra-loose monetary policy since 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.
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.