Japanese Yen remains weaker following remarks from new Economy Minister Ryosei Akazawa
by Akhtar Faruqui · FXStreet- The Japanese Yen loses ground as the BoJ’s Summary of Opinions signals its intention to maintain an accommodative monetary stance.
- Japan's Economy Minister Akazawa said that PM Ishiba anticipates the BoJ to conduct economic evaluations before further rate hikes.
- The US Dollar receives support as traders adopt caution amid rising geopolitical tensions 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 Economic Revitalization Minister Ryosei Akazawa stated on Wednesday that Prime Minister Shigeru Ishiba anticipates the Bank of Japan will conduct thorough economic evaluations before raising interest rates again. In his first news conference as the economy minister, Akazawa emphasized, "Our top priority is to ensure that Japan fully exits deflation," adding that "it will take some time to achieve a complete exit," according to Reuters.
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 cut 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.
- Japan's newly elected Prime Minister Shigeru Ishiba stated 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.
- 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 would 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% | -0.03% | 0.26% | -0.09% | -0.35% | -0.49% | -0.04% | |
| EUR | 0.05% | 0.02% | 0.37% | -0.06% | -0.30% | -0.44% | 0.02% | |
| GBP | 0.03% | -0.02% | 0.29% | -0.08% | -0.31% | -0.46% | 0.00% | |
| JPY | -0.26% | -0.37% | -0.29% | -0.30% | -0.61% | -0.77% | -0.30% | |
| CAD | 0.09% | 0.06% | 0.08% | 0.30% | -0.26% | -0.40% | 0.05% | |
| AUD | 0.35% | 0.30% | 0.31% | 0.61% | 0.26% | -0.15% | 0.32% | |
| NZD | 0.49% | 0.44% | 0.46% | 0.77% | 0.40% | 0.15% | 0.47% | |
| CHF | 0.04% | -0.02% | -0.01% | 0.30% | -0.05% | -0.32% | -0.47% |
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).
Bank of Japan FAQs
What is the Bank of Japan?
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%.
What has been the Bank of Japan’s policy?
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.
How do Bank of Japan’s decisions influence the Japanese Yen?
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.
Why did the Bank of Japan decide to start unwinding its ultra-loose policy?
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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