- Japanese Yen attracts some sellers following the release of softer domestic data.
- A small US dollar recovery from the trough over a few months will lend you more support to USD/JPY.
- JPY has little movement after BOJ's decision not to change short-term interest rates.
The Japanese Yen (JPY) has been moving little after the Bank of Japan (BOJ) decision to leave without changing its short-term interest rate targets, and remained silenced in the wake of weaker domestic data released this Wednesday. Apart from this, the modest US Dollar (USD) bounce from the low tentacles on Tuesday for months lifts the USD/JPY pair in the mid-149.00s during Asian sessions.
However, JPY appears to be reluctant to place offensive bets and has chosen to wait for Gov. Boji Kazuoueda's comments at a post-meeting press conference. Investors will look for clues as to the timing and scope of future rate hikes by BOJ. The focus then shifts to the results of the two-day FOMC meeting, promoting the USD and USD/JPY pair.
Japanese Yen sticks to something weaker than expected domestic data inspired by
- The Bank of Japan (BOJ) announced on Wednesday that it had maintained its short-term interest rate targets in the range of 0.40%-0.50% after completing its two-day monetary policy review meeting. In the attached policy statement, the central bank noted that uncertainty surrounding the Japanese economy remains high in prices.
- Data released earlier this Wednesday showed that Japan's trade balance had shifted from a deficit of 41.543 billion yen in the same month last year to a surplus of 584.5 billion yen in February. The reversal was driven by a surge in exports, which was driven by a 0.7% decline in imports, up 11.4% year-on-year.
- Meanwhile, Japanese machine orders fell to 3.5% in January 2025. This is significantly worse than the 1.2% decline registered in the previous month. Each year, machine orders rose 4.4% in the reported month, slightly outperforming the December 4.3% increase, while readings fell below the 6.9% forecast.
- In addition to this, a Reuter Tankan poll showed that business sentiment among Japanese manufacturers had worsened in March for the first time in three months amid concerns about US tariff policies and weakness in the Chinese economy. In fact, the manufacturer's index appeared at -1 from +3 in February.
- The results of Japan's annual spring labor negotiations concluded on Friday showed that businesses largely agreed to the union's demand for strong wage growth for the third year in a row. This could increase consumer spending, contribute to rising inflation and provide BOJ headroom to maintain hiking rates.
- Wednesday's investors will also focus on the results of the two-day FOMC Monetary Policy Conference, which is scheduled to be announced later in the US session. The risk of heading towards major central bank events is the return of the USD/JPY pair in the mid-149.00s, with a moderate US dollar recovery from a low low in months.
USD/JPY Bulls may need to wait for a move above 150.00 before placing a new bet
From a technical standpoint, the recent breakout, above the 100-period Simple Moving Average (SMA) on the 4-hour chart, was considered a key trigger for the Bull. Furthermore, the oscillators in the chart above are kept comfortably in positive areas and support additional profit outlook. That said, overnight failures than the psychological mark of 150.00 require some attention. Therefore, it is wise to wait for sustained strength beyond the above handles on your way to the 151.00 round figure, towards the 150.75-150.80 region, or the 200th SMA on the 4-hour chart, before moving towards the 150.75-150.80 region, or the 200th SMA.
On the back, the area of 149.20 continues, with the 149.00 mark and the 148.80 region (100 cycle SMA on the 4-hour chart) must serve as immediate support. A compelling break below the latter suggests that the recent move-up seen in the past week or so has exhausted steam and dragged the USD/JPY pair to the 148.00 mark to support 148.25-148.20. The downward trajectory can be extended further towards the 147.70 area, 147.20 area and the 147.00 mark, around the 146.55-146.50 area mentioned on March 11th.
Japanese Yen Questions
Japanese Yen (JPY) is one of the most traded currencies in the world. Its value is widely determined by the performance of the Japanese economy, but more specifically, by the Bank of Japan's policies, the difference in bond yields between Japan and the US, or the risk of sentiment among traders among other factors.
One of the Bank of Japan's obligations is currency control, so that movement is key to the yen. BOJ has generally stepped in directly into the currency market to reduce the value of the yen, but it refrains from doing it frequently due to political concerns from its major trading partners. The BOJ Ultra Loose Monetary Policy from 2013 to 2024 saw an increase in policy differences between the Bank of Japan and other major central banks, and the yen was depreciated from its major currencies. More recently, the yen has given some support in the gradually rewind of this ultra-loose policy.
Over the past decade, BOJ's stance on sticking to ultra-loose monetary policy has widened policy differences with other central banks, particularly the US Federal Reserve. This supported the widening gap between US and Japanese bonds in 2010, and the US dollar against the Japanese yen. The 2024 BOJ's decision, coupled with interest cuts from other major central banks, is narrowing this gap.
Japanese yen is often considered a safe home investment. This means that in times of market stress, investors are more likely to spend money on Japanese currency for its reliability and stability. An era of turbulence could strengthen the value of the yen to other currencies where investment is considered more risky.
