- USD/JPY drops to 151.95 in the Asian session on Friday.
- The BoJ leaves the door open for a short-term rate hike.
- Investors are awaiting US NFP data, due out later on Friday.
The USD/JPY pair weakens to around 151.95 during Asian trading hours on Friday. The Japanese Yen (JPY) rises after comments from Bank of Japan (BoJ) Governor Kazuo Ueda, which were interpreted as increasing the probability of a rate hike in December.
The Bank of Japan (BoJ) decided to keep short-term interest rates at 0.25% at its two-day meeting on Thursday. The central bank projected that inflation would move around its 2% target in the coming years. “Looking at the national data, wages and prices are moving in line with our forecasts. In terms of downside risks to the US and overseas economies, we are seeing the clouds clearing a bit.” said BoJ Governor Kazuo Ueda. Less dovish comments from BoJ officials will likely support the JPY in the near term.
October US Nonfarm Payrolls (NFP) data will be in the spotlight on Friday. The US economy is estimated to have added 113,000 jobs in October, while the unemployment rate is expected to remain stable at 4.1%. Should the data be weaker than expected, this could boost the Federal Reserve’s (Fed) dovish bets, putting some selling pressure on the dollar.
The Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets the country’s monetary policy. Its mandate is to issue banknotes and carry out monetary and currency control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan has embarked on ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low inflation environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing of banknotes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further relaxed policy by first introducing negative interest rates and then directly controlling the yield on its 10-year government bonds.
The Bank of Japan’s massive stimulus has caused the Yen to depreciate against its major currency pairs. This process has been exacerbated more recently by a growing policy divergence between the Bank of Japan and other major central banks, which have opted to sharply raise interest rates to combat inflation levels that have been at record highs for decades. The Bank of Japan’s policy of keeping rates low has caused the differential with other currencies to increase, dragging down the value of the Yen.
The weakness of the Yen and the rebound in global energy prices have caused a rise in Japanese inflation, which has exceeded the 2% target set by the Bank of Japan. Even so, the Bank of Japan judges that sustainable and stable achievement of the 2% objective is still not in sight, so a sudden change in current monetary policy seems unlikely.
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.
