- The USD/JPY is slightly traded by about 143.75, retreating a maximum intradic of 144.25.
- The American dollar index is recovered after reaching its lowest level since February 2022 on Tuesday.
- The ADP report shows surprising job losses in the private sector in June, with constant salary growth.
The Japanese Yen (JPY) loses ground against the US dollar (USD) on Wednesday, while the US dollar recovers slightly after reaching its lowest level since February 2022 the day before. The modest rebound occurs while the operators digest a lot of US economic data and cautious comments of the president of the Federal Reserve (Fed), Jerome Powell, which have helped to relieve part of the recent down pressure over the US dollar.
The USD/JPy torque is quoting slightly upwards, going back to minimums of more than three weeks. At the time of writing, the PAR is around 143.75, below the intradic peak of 144.25, since it yields a part of the profits previously recorded in the day after an employment change report of weaker ADP than expected.
The ADP report showed an unexpected decrease in the use of the private sector for June, while salary growth remained stable. Private companies in the US eliminated 33,000 jobs last month, marking the first fall since March 2023. This is still a revised employment gain of 29,000 in May and is well below the market expectations of an increase of 95,000. Data reinforces the case for possible interest rate cuts by the Fed, but also generate concerns that the labor market could be cooled more quickly than anticipated.
However, the reaction in the US dollar was relatively moderate, with the US dollar index (DXY), just below the 97.00 mark, climbing almost 0.25% in the day. Investors seem caution before the most complete non -agricultural payroll (NFP) report on Thursday, which is expected to provide clearer signals about the strength of the labor market and the Fed policy perspective.
Meanwhile, tariff negotiations between the United States and Japan have entered into a critical phase, with both parties hardening their positions before the deadline of July 9. On Tuesday, former President Donald Trump warned that tariffs of up to 35% could be imposed on Japanese imports if an agreement is not reached, stating, affirming, affirming, “I don’t think Japan has been fair to us. They have had a great deal for decades; those days have ended.” Comments exert renewed pressure on Tokyo to offer concessions. However, Japanese officials remain firm, with Prime Minister Shigeru Ishiba reaffirming Japan’s position to “protect national interests,” particularly in agriculture and the automotive sector. Tokyo has proposed instead improving bilateral investment as a more sustainable solution. With little progress reported and increasing tensions, markets are increasingly nervous as the deadline is approaching.
The governor of the Bank of Japan (BOJ), Kazuo Ueda, adopted a cautious tone on Tuesday, emphasizing that the Central Bank remains in waiting mode. He pointed out that the BOJ is closely monitoring the potential impact of the US -led tariffs and the trajectory of underlying inflation before committing more policy movements. “The general inflation is above 2%, the underlying inflation is below 2% – I want both to converge at 2% by the end of my mandate,” said EUEDA, referring at the end of his mandate in April 2028. Despite the continuous speculation on gradual normalization, the market prices reflects limited expectations, with the swaps currently considering only 25 basic points of hardening during the Next year.
BANCO DE JAPAN – FREQUENTLY QUESTIONS
The Bank of Japan (BOJ) is the Japanese Central Bank, which sets the country’s monetary policy. Its mandate is to issue tickets and carry out monetary and foreign exchange control to guarantee the stability of prices, which means an inflation objective around 2%.
The Bank of Japan has embarked on an ultralaxa monetary policy since 2013 in order to stimulate the economy and feed inflation in the middle of a low inflation environment. The bank’s policy is based on the Quantitative and Qualitative Easing (QQE), or ticket printing to buy assets such as state or business bonds to provide liquidity. In 2016, the Bank redoubled its strategy and relaxed even more policy by introducing negative interest rates and then directly controlling the performance of its state bonds to 10 years.
The massive stimulus of the Bank of Japan has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to combat inflation levels that have been in historical maximums. Japan Bank’s policy to maintain low types has caused an increase in differential with other currencies, dragging the value of YEN.
The weakness of the YEN and the rebound in world energy prices have caused an increase in Japanese inflation, which has exceeded the 2% objective set by the Bank of Japan. Even so, the Bank of Japan judges that the sustainable and stable achievement of the 2%objective is not yet glimpsed, so an abrupt change of 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.
