Is the Yen Running Out of Support as the Dollar Slides Globally?
Source: Kapitales Research
Highlights:
The yen traded in a narrow band around 158.70 per dollar at the time of writing, after the Bank of Japan left its policy rate unchanged at 0.75%.
Although Japan’s core inflation cooled to 2.4% in December, it stayed comfortably above the central bank’s 2% goal, keeping speculation of further rate hikes intact.
The US dollar headed for its steepest weekly drop since June, adding to global currency volatility amid geopolitical and policy uncertainty.
BOJ Holds Rates as Currency Stays Under Pressure
The Bank of Japan (BOJ) kept its benchmark interest rate unchanged at 0.75%, as widely expected, leaving the Japanese yen trading in a tight range even as the US dollar suffered its sharpest weekly decline since June. The yen was last slightly weaker at 158.70 per dollar at the time of writing, reflecting lingering concerns that Japan’s monetary policy remains accommodative despite rising inflation risks.
The decision came alongside upward revisions to the BOJ’s economic and inflation forecasts, signalling that policymakers remain open to further rate hikes as Japan’s post-pandemic recovery continues.
Inflation Data Keeps Rate-Hike Expectations Alive
Data released on Friday showed Japan’s core CPI increased 2.4% year-on-year in December, slowing from 3.0% in November but still sitting above the central bank’s 2% target. The cooling trend was largely attributed to base effects stemming from last year’s spike in energy costs after fuel subsidies were withdrawn. A narrower inflation measure excluding both fresh food and fuel rose 2.9%, reinforcing the view that underlying price pressures remain persistent. The BOJ ended its decade-long ultra-easy stimulus in 2024 and has raised rates several times since, including a hike last month that pushed borrowing costs to their highest level in three decades.
Markets Watch for Intervention Signals
Despite higher rates, the yen has struggled, with traders increasingly wary that a move beyond 160 per dollar could trigger official intervention. Focus has now turned to Governor Kazuo Ueda’s press briefing, with investors watching closely for signals on when the next rate increase could come and whether policymakers strike a more hawkish tone.
Dollar Weakness Adds to Volatility
Meanwhile, the US dollar slid sharply after geopolitical tensions and abrupt policy reversals linked to Greenland unsettled investors. The episode fuelled risk aversion and added to global currency volatility, keeping pressure on the yen and other major currencies.
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The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
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Is the Yen Running Out of Support as the Dollar Slides Globally?
Highlights:
BOJ Holds Rates as Currency Stays Under Pressure
The Bank of Japan (BOJ) kept its benchmark interest rate unchanged at 0.75%, as widely expected, leaving the Japanese yen trading in a tight range even as the US dollar suffered its sharpest weekly decline since June. The yen was last slightly weaker at 158.70 per dollar at the time of writing, reflecting lingering concerns that Japan’s monetary policy remains accommodative despite rising inflation risks.
The decision came alongside upward revisions to the BOJ’s economic and inflation forecasts, signalling that policymakers remain open to further rate hikes as Japan’s post-pandemic recovery continues.
Inflation Data Keeps Rate-Hike Expectations Alive
Data released on Friday showed Japan’s core CPI increased 2.4% year-on-year in December, slowing from 3.0% in November but still sitting above the central bank’s 2% target. The cooling trend was largely attributed to base effects stemming from last year’s spike in energy costs after fuel subsidies were withdrawn. A narrower inflation measure excluding both fresh food and fuel rose 2.9%, reinforcing the view that underlying price pressures remain persistent. The BOJ ended its decade-long ultra-easy stimulus in 2024 and has raised rates several times since, including a hike last month that pushed borrowing costs to their highest level in three decades.
Markets Watch for Intervention Signals
Despite higher rates, the yen has struggled, with traders increasingly wary that a move beyond 160 per dollar could trigger official intervention. Focus has now turned to Governor Kazuo Ueda’s press briefing, with investors watching closely for signals on when the next rate increase could come and whether policymakers strike a more hawkish tone.
Dollar Weakness Adds to Volatility
Meanwhile, the US dollar slid sharply after geopolitical tensions and abrupt policy reversals linked to Greenland unsettled investors. The episode fuelled risk aversion and added to global currency volatility, keeping pressure on the yen and other major currencies.
Disclaimer for Kapitales Research
The materials provided by Kapitales Research, including articles, news, data, reports, opinions, images, charts, and videos ("Content"), are intended for personal, non-commercial use only. The primary goal of this Content is to educate and inform readers. This Content is not meant to offer financial advice, nor does it include any recommendation or opinion that should be relied upon for making financial decisions. Certain Content on this platform may be sponsored or unsponsored, but it does not serve as a solicitation or endorsement to buy, sell, or hold any securities, nor does it encourage any specific investment activities. Kapitales Research is not authorized to provide investment advice, and we strongly advise users to seek guidance from a qualified financial professional, such as a financial advisor or stockbroker, before making any investment choices. Kapitales Research disclaims all liability for any direct, indirect, incidental, or consequential damages arising from the use of the Content, which is provided without any warranties. The opinions expressed by contributors or guests are their own and do not necessarily reflect the views of Kapitales Research. Media such as images or music used on this platform are either owned by Kapitales Research, sourced through paid subscriptions, or believed to be in the public domain. We have made reasonable efforts to credit sources where appropriate. Kapitales Research does not claim ownership of any third-party media unless explicitly stated otherwise.
Customer Notice:
Nextgen Global Services Pty Ltd trading as Kapitales Research (ABN 89 652 632 561) is a Corporate Authorised Representative (CAR No. 1293674) of Enva Australia Pty Ltd (AFSL 424494). The information contained in this website is general information only. Any advice is general advice only. No consideration has been given or will be given to the individual investment objectives, financial situation or needs of any particular person. The decision to invest or trade and the method selected is a personal decision and involves an inherent level of risk, and you must undertake your own investigations and obtain your own advice regarding the suitability of this product for your circumstances. Please be aware that all trading activity is subject to both profit & loss and may not be suitable for you. The past performance of this product is not and should not be taken as an indication of future performance.
Kapitales Research, Level 13, Suite 1A, 465 Victoria Ave, Chatswood, NSW 2067, Australia | 1800 005 780 | info@kapitales.com.au