- USD/JPY bounces towards 147.50 as BoJ rate hike expectations ease.
- Kazuo Ueda, governor of the BoJ, doubts Japan's economic strength in the face of weak consumption.
- Fed officials would confirm that inflation will return to 2% before considering rate cuts.
The USD/JPY pair regains the 147.50 level during the European session on Tuesday after a two-day consolidation. The pair rebounds as the Japanese Yen (JPY) weakens after the Bank of Japan (BoJ) expressed doubts about the country's economic prospects.
In Tuesday's Asian session, BoJ Governor Kazuo Ueda said the economy is recovering for little economic reason as consumption remains weak. Likewise, Finance Minister Shunichi Suzuki separately stated that Japan is not at a stage where it can declare victory over deflation. Ueda and Suzuki's comments have tempered market expectations that the BoJ will abandon negative rates.
Expectations for the BoJ to abandon expansionary policy were significantly higher before Ueda's comment, as Japan's revised fourth-quarter gross domestic product (GDP) estimate shows the economy was not in a technical recession in the second half. 2023. The revised estimates show that the economy grew by 0.1% compared to the 0.1% decrease indicated in the preliminary estimates.
Likewise, some BoJ policymakers were optimistic about a positive wage cycle, which could keep inflation sustainably above the desired rate of 2%.
Meanwhile, market sentiment remains optimistic ahead of February US Consumer Price Index (CPI) data, due at 12:30 GMT. The inflation data will offer new insights into US interest rates. Federal Reserve (Fed) policymakers want to see inflation data moderate for months as a test before considering a dovish interest rate decision.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
