Yen Remains Weak as BOJ Delays on Monetary Policy Decisions

The Japanese Yen (JPY) continues to decline as June comes to a close. Earlier this month, USDJPY was trading around 155.00-156.00, amid rising expectations that the Bank of Japan (BOJ) would announce a reduction in their bond purchasing as part of monetary policy revisions, following the end of its negative rate policy.

However, on June 14th, the yen weakened further after the central bank left monetary policy unchanged and delayed providing details on when the bond purchase slowing would begin. The next policy meeting is scheduled for the end of July. BOJ Governor Ueda’s dovish comments, stating that recent inflation projections were not reaching the desired 2% target, also influenced the decision to maintain the current policy. Throughout the month, the Yen has seen a steady decline.

USDJPY has strengthened by more than 5% since the end of March and reached a 38-year high today, trading around 160.70 as of the writing of this article.

Additionally, Prime Minister Kishida’s advisory panel has expressed significant concern about the impact of continued yen depreciation on Japanese consumers’ cost of living, as goods and services become more expensive with a weaker Yen. Japan is experiencing inflation, but with US interest rates remaining steady under the Federal Reserve’s (Fed) “wait and see” approach to review a sustained period of economic data supporting its first rate cut, the persistent gap between US and Japanese interest rates remains the primary factor keeping the Yen depressed against the USD.

There is growing market sentiment that USDJPY could reach 165.00, driven by expectations of a continued “orderly ascent” until the next BOJ meeting, alongside the Fed waiting for cumulative inflation data and labor statistics. However, potential short-term volatility spikes remain a factor that could prompt another BOJ intervention.

“The markets are approaching a point where the BOJ’s actions on monetary policy will speak louder than words.” Sal Provenzano, Product Manager – FX.

The below chart shows USDJPY FX daily spot rates (10:00AM EST) from TraditionData, illustrating USDJPY appreciation throughout the month of June.