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- The Japanese Yen ticks higher on stronger Tokyo CPI, albeit lacks follow-through.
- The BoJ policy uncertainty is holding back the JPY bulls from placing fresh bets.
- Traders also seem reluctant and prefer to wait for the US macro data/event risks.
The Japanese Yen (JPY) struggles to capitalize on the stronger Tokyo CPI-inspired modest uptick, though manages to hold above last week’s swing low against its American counterpart through the Asian session on Tuesday. The uncertainty over the Bank of Japan’s (BoJ) plan to tighten its monetary policy holds back the JPY bulls from placing aggressive bets. The downside, however, remains cushioned amid expectations that the BoJ will pivot away from its ultra-loose monetary policy settings if wage negotiations result in bumper pay hikes. Adding to this, speculations that Japanese authorities will intervene to prop up the domestic currency and the cautious market mood lend some support to the safe-haven JPY.
The US Dollar (USD), on the other hand, continues with its struggle to gain any meaningful traction in the wake of growing acceptance that the Federal Reserve (Fed) will start cutting interest rates in June. This further contributes to capping the upside for the US/JPY pair. Traders, however, seem reluctant and prefer to wait for move cues about the Fed’s rate-cut path. Hence, the focus remains glued to Fed Chair Jerome Powell’s congressional testimony on Wednesday and Thursday. this week’s important US macro data, including the closely-watched Nonfarm Payrolls (NFP) on Friday, will play a key role in influencing the USD price dynamics and help determine the near-term trajectory for the currency pair.
Daily digest market movers: Japanese Yen fails to attract any meaningful buying amid BoJ policy uncertainty
- A rise in Tokyo CPI renews chatter that the Bank of Japan will exit the negative interest rates regime in the coming month and provides a modest lift to the Japanese Yen.
- The Statistics Bureau reported that consumer inflation in Japan’s capital rebounded to the 2.5% YoY rate in February from a 22-month low of 1.6% in the previous month.
- Meanwhile, a core reading, which excludes both energy and fresh food, fell to 3.1% last month from 3.3% in January, though remained above the BoJ’s 2% annual target.
- Sticky inflation, along with expectations for another bumper pay hike this year, should allow the BoJ to end its ultra-loose monetary policy settings sooner rather than later.
- The au Jibun Bank Service PMI for Japan was finalized at 52.9 for February as compared to the preliminary estimate of 52.5 and the 53.1 registered in the previous month.
- Japan’s economy minister, Yoshitaka Shindo, denied a media report over the weekend that Japan is considering calling an end to deflation in the wake of rising prices.
- The US Dollar bulls remain on the defensive amid firming expectations that the Federal Reserve will eventually start cutting interest rates at the June policy meeting.
- Atlanta Fed President Raphael Bostic does not anticipate back-to-back rate cuts when they begin and still expects only two 25-basis point rate cuts by the end of this year.
- Bostic further said that inflation is on track to return to the 2% target, but he needs to see more progress and gain confidence in disinflation before voting to reduce policy rates.
- Traders now seem reluctant and prefer to wait on the sidelines ahead of this week’s important US macro releases, starting with the ISM Services PMI later this Tuesday.
- The focus, however, remains on Fed Chair Jerome Powell’s semi-annual congressional testimony on Wednesday and Thursday, and the US Nonfarm Payrolls (NFP) on Friday.
Technical analysis: USD/JPY nees to surpass 150.80-150.85 region for bulls to seize near-term control
From a technical perspective, the USD/JPY pair has been oscillating in a familiar range over the past three weeks or so. This constitutes the formation of a rectangle on short-term charts. Against the backdrop of a rally from the December 2023 low, this might still be categorized as a bullish consolidation phase. Moreover, oscillators on the daily chart are holding comfortably in the positive territory and suggest that the path of least resistance for spot prices is to the upside.
That said, it will still be prudent to wait for a sustained breakout through the trading range hurdle, around the 150.75-150.85 region, which coincides with the YTD peak touched in February, before positioning for any further gains. The USD/JPY pair might then surpass the 151.00 mark and accelerate the momentum towards the 151.45 intermediate resistance en route to the 152.00 neighbourhood, or a multi-decade peak set in October 2022 and retested in November 2023.
On the flip side, the 150.00 psychological mark now seems to protect the immediate downside. Any further decline is likely to attract fresh buyers near last week’s swing low, around the 149.20 area. This is followed by the 149.00 mark, which if broken might shift the bias in favour of bears. The subsequent could drag the USD/JPY pair to the 148.30 support en route to the 148.00 mark and the 100-day Simple Moving Average (SMA), currently pegged near the 147.80 region.
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 Pound Sterling.
| USD | EUR | GBP | CAD | AUD | JPY | NZD | CHF | |
| USD | 0.06% | 0.02% | 0.03% | 0.02% | -0.01% | 0.08% | 0.04% | |
| EUR | -0.06% | -0.05% | -0.02% | -0.06% | -0.05% | -0.01% | -0.01% | |
| GBP | -0.01% | 0.04% | 0.01% | 0.00% | -0.01% | 0.06% | 0.04% | |
| CAD | -0.03% | 0.03% | -0.01% | -0.05% | -0.03% | 0.03% | 0.02% | |
| AUD | -0.02% | 0.05% | 0.00% | 0.03% | -0.01% | 0.06% | 0.06% | |
| JPY | 0.00% | 0.07% | 0.00% | 0.03% | 0.01% | 0.10% | 0.04% | |
| NZD | -0.08% | 0.00% | -0.07% | -0.05% | -0.04% | -0.08% | 0.00% | |
| CHF | -0.05% | 0.01% | -0.04% | -0.03% | -0.03% | -0.06% | 0.02% |
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.
