The Japanese Yen (JPY) has seen a slight recovery from its lowest points since February, managing to touch a more robust level against the US dollar (USD) earlier this Wednesday. Still, significant gains seem hard to achieve. With Japan’s first female prime minister, Moshi Sato, leaning towards more expansionary fiscal policies, the Bank of Japan (BOJ) might face greater challenges. Moreover, Takuji Iyer, a close economic advisor, remarked that the BOJ’s decision to raise interest rates this month may have been premature, further weakening the JPY.
Despite this, Takae reinforced market anticipations for more policy adjustments by BOJ, suggesting that Takada could support a 25 basis point interest rate increase by January if economic conditions are robust. This stance contrasts sharply with the growing expectations that the US Federal Reserve (Fed) could lower borrowing costs twice this year. Additionally, worries about a prolonged shutdown of the US government may weigh on the US dollar. The differing policy outlooks between the BOJ and Fed tend to bolster a weaker JPY, which also may contribute to stabilizing the USD/JPY pair.
Japan’s Yen on the sidelines as fiscal easing offers some optimism
- An unexpected triumph by Anesthet in the ruling Liberal Democratic Party (LDP) leadership contest has raised hopes for increased stimulus, leading investors to rethink their expectations for BOJ interest rate hikes this month and dragging down the yen for a third consecutive day on Wednesday.
- On a related note, Japan’s inflation has consistently remained above the BOJ’s 2% target for over three years now, with economic growth sustained for five quarters leading up to June. Interestingly, two of the nine BOJ board members opposed the decision to hold interest rates steady last month.
- Takuji Aida, another close advisor to Takacs, suggested that a base interest rate hike on January 25 hinges on the BOJ keeping relatively loose monetary policy in place, which raises hopes for another potential hike after 2027.
- This perspective diverges from the increasing likelihood of two rate cuts by the US Federal Reserve in October and December. Meanwhile, the US dollar has surged to its highest levels since late August, benefiting from these dovish Fed expectations.
- With the U.S. government shutdown now entering its second week and no clear resolution in sight, both Republicans and Democrats remain firm in their respective stances. An extended shutdown could negatively impact overall economic performance and add risks for federal workers’ job security.
- Attention will now shift to the release of the FOMC minutes later on Wednesday. Additionally, Fed Chair Jerome Powell’s remarks on Thursday may shed more light on potential interest rate cuts, influencing short-term USD pricing dynamics and injecting new energy into the USD/JPY pair.
USD/JPY technical setup indicates a possible corrective pullback is in the cards
A breakout above the horizontal barrier at 151.00 might provide fresh impetus for USD/JPY bulls if it continues above the 152.00 mark. However, the daily Relative Strength Index (RSI) approaches overbought territory, suggesting it could be wise to wait for short-term consolidation or slight pullbacks before further positioning. Potential support for a downward slide may be found near the 151.75 area, with the 152.00 mark standing as a solid short-term base.
Still, the USD/JPY pair appears to be set for an uptrend towards the 153.00 threshold, progressing towards the next significant resistance around the 153.25-153.30 range. If momentum continues, it could push past the 153.70 hurdle, as bulls aim to hit the 154.00 mark, a level not seen since February.
This week’s Japanese yen price
The table below shows the percentage change of the Japanese Yen (JPY) against listed currencies this week. The Japanese yen has appreciated the most against the New Zealand dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.91% | 0.44% | 1.92% | 0.08% | 0.35% | 1.34% | 0.62% | |
| EUR | -0.91% | -0.58% | 0.90% | -0.86% | -0.59% | 0.39% | -0.33% | |
| GBP | -0.44% | 0.58% | 1.61% | -0.29% | -0.02% | 0.98% | 0.25% | |
| JPY | -1.92% | -0.90% | -1.61% | -1.77% | -1.60% | -0.64% | -1.33% | |
| CAD | -0.08% | 0.86% | 0.29% | 1.77% | 0.31% | 1.27% | 0.54% | |
| AUD | -0.35% | 0.59% | 0.02% | 1.60% | -0.31% | 1.00% | 0.27% | |
| NZD | -1.34% | -0.39% | -0.98% | 0.64% | -1.27% | -1.00% | -0.72% | |
| CHF | -0.62% | 0.33% | -0.25% | 1.33% | -0.54% | -0.27% | 0.72% |
The heatmap shows how different currencies have changed relative to one another. The left column shows the base currency, while the top row displays the quote currency. For instance, if you select Japanese Yen from the left column and check its value against the US Dollar along the horizontal axis, the percentage change shown reflects JPY(Base)/USD(QUOTE).
