- The Japanese yen has strengthened while the dollar remains weak ahead of Friday's release of US labor data.
- Japan's Economy Minister Akazawa said the timing of monetary policy changes is important.
- Traders are awaiting Friday's U.S. jobs data, including nonfarm payrolls (NFP) and average hourly wages, for future direction.
The Japanese yen (JPY) regained recent gains following comments from Japan's cabinet on Friday. Newly appointed Minister of Economy, Trade and Industry Yoshinari Akazawa said that both Prime Minister Shigeru Ishiba and the Bank of Japan (BOJ) agree that overcoming deflation is Japan's top priority.
Economy, Trade and Industry Minister Akazawa added, “There is no change in the interpretation of the agreement between the government and the Bank of Japan, which aims for 2% inflation.'' The timing of monetary policy changes is important and needs to be consistent with Japan's broader goal of overcoming deflation.
Chief Cabinet Secretary Yoshimasa Hayashi announced on Friday that Prime Minister Ishiba had ordered the formulation of comprehensive economic measures. Hayashi also mentioned the idea of submitting a supplementary budget bill to the Diet after the House of Representatives election.
However, as the possibility of further interest rate hikes by the Bank of Japan diminishes, the Japanese yen may struggle, and the downside of the USD/JPY may be limited. “I don't think we are in an environment where further rate hikes are necessary,” newly elected Prime Minister Ishiba said on Wednesday, according to Reuters.
Daily Digest Market Movers: Japanese yen under downward pressure from dovish mood surrounding the Bank of Japan
- The US dollar (USD) strengthened after a better-than-expected US ISM Services PMI report and ADP employment change report, casting doubt on dovish expectations for the Federal Reserve's monetary policy.
- According to the CME FedWatch tool, the market has a 67.4% chance of a 25 basis point rate cut by the Federal Reserve in November, while the probability of a 50 basis point rate cut is 32.6%, down from 35.2% a day earlier.
- Chicago Fed President Austan Goolsby reiterated Thursday that interest rates need to be lowered “significantly” over the next year. Goolsby also said he wants to keep the unemployment rate at 4.2% and prevent it from rising any further.
- The US ISM services PMI in September was 54.9, up from 51.5 in August and higher than the market expectation of 51.7. Meanwhile, the service payment price index, a key inflation indicator, rose from 57.3 to 59.4.
- Futures show there is less than a 50% chance that the Bank of Japan will raise interest rates by 10 basis points by the end of 2024. Additionally, interest rates are expected to remain at 0.5% by the end of next year, up from the current 0.25%. Reuters.
- Bank of Japan board member Asahi Noguchi said the Bank of Japan “must patiently maintain accommodative financial conditions.” Noguchi said the Bank of Japan is likely to adjust the level of financial support in stages, carefully assessing whether inflation can sustainably reach its 2% target supported by rising wages. Showed.
- According to the ADP U.S. Employment Change Report, payrolls rose by 143,000 in September, exceeding expectations of 120,000. Additionally, annual salaries increased by 4.7% year-on-year. The total number of jobs added in August was revised upward from 99,000 to 103,000.
- On Tuesday, the Bank of Japan indicated in its summary of opinions from its September monetary policy meeting that it has no immediate plans to raise rates further. The central bank intends to maintain an accommodative stance, but leaves room for adjustments if economic conditions show significant improvement.
Technical analysis: USD/JPY hovers around 146.50, 5-week high
USD/JPY was trading around 146.50 on Friday. Daily chart analysis indicates that the pair may attempt to break out of the ascending channel pattern, indicating a strengthening bullish bias. Moreover, the 14-day relative strength index (RSI) remains above 50, confirming the continuation of the bullish trend.
On the upside, the USD/JPY pair is facing resistance near the top of the ascending channel near 147.21, a five-week high last reached on September 3rd. A break above this level could enable a test for USD/JPY. It hit a seven-week high of 149.40.
On the downside, the USD/JPY pair may find support at the 9-day exponential moving average (EMA) near 144.97, followed by the lower bound of the ascending channel at 143.60. A break below this level could push the pair towards 139.58, its lowest since June 2023.
USD/JPY: Daily chart
Today's Japanese yen price
The table below shows the percentage change of the Japanese Yen (JPY) against major listed currencies today. The Japanese yen was the strongest against the euro.
| USD | EUR | GBP | JPY | CAD | australian dollar | new zealand dollar | swiss franc | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.06% | -0.01% | -0.50% | 0.00% | 0.00% | 0.04% | -0.12% | |
| EUR | -0.06% | -0.04% | -0.55% | -0.03% | -0.06% | 0.02% | -0.20% | |
| GBP | 0.00% | 0.04% | -0.48% | 0.04% | -0.04% | 0.05% | -0.18% | |
| JPY | 0.50% | 0.55% | 0.48% | 0.51% | 0.49% | 0.54% | 0.34% | |
| CAD | -0.01% | 0.03% | -0.04% | -0.51% | -0.02% | 0.07% | -0.20% | |
| australian dollar | 0.00% | 0.06% | 0.04% | -0.49% | 0.02% | 0.07% | -0.20% | |
| new zealand dollar | -0.04% | -0.02% | -0.05% | -0.54% | -0.07% | -0.07% | -0.24% | |
| swiss franc | 0.12% | 0.20% | 0.18% | -0.34% | 0.20% | 0.20% | 0.24% |
The heat map shows the percentage change between major currencies. The base currency is selected from the left column and the quote currency is selected from the top row. For example, if you select Japanese Yen from the left column and move along the horizontal line to USD, the percentage change displayed in the box represents JPY (base)/USD (estimate).
Bank of Japan Frequently Asked Questions
The Bank of Japan (BoJ) is Japan's central bank, which determines the country's monetary policy. Its mission is to issue paper money and exercise monetary and financial control to ensure price stability, which means an inflation target of about 2%.
The Bank of Japan launched an ultra-easy monetary policy in 2013 to stimulate the economy and promote inflation in a low-inflation environment. The bank's policy is based on quantitative and qualitative easing (QQE), or printing money that provides liquidity by buying assets such as government bonds and corporate bonds. In 2016, the bank doubled down on its strategy, first introducing negative interest rates and then further easing policy by directly controlling the yield on 10-year Treasuries. In March 2024, the Bank of Japan raised interest rates, effectively retreating from its ultra-accommodative monetary policy stance.
The yen has weakened relative to major currencies due to the World Bank's large-scale economic stimulus package. This process is expected to worsen in 2022 and 2023 due to widening policy divergence between the Bank of Japan and other major central banks, which opted for significant rate hikes to combat the highest levels of inflation in decades. did. The Bank of Japan's policies widened the gap between the yen and other currencies, causing the value of the yen to fall. This trend partially reversed in 2024, when the Bank of Japan decided to abandon its ultra-accommodative policy stance.
Japan's inflation rate has risen due to a weaker yen and soaring global energy prices, exceeding the Bank of Japan's 2% target. The prospect of domestic salary increases, a key driver of inflation, also contributed to the move.
