Japanese Yen remains depressed ahead of BoJ Governor Ueda's speech
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Haresh Menghani
webinar date
19 Mar @ 01:57 (GMT+0)

Japanese Yen remains depressed ahead of BoJ Governor Ueda's speech

  • The Japanese Yen attracts some sellers following the release of softer domestic data.
  • A modest USD recovery from a multi-month trough further lends support to USD/JPY.
  • The JPY moves little after the BoJ decision to keep short-term interest rates unchanged.

The Japanese Yen (JPY) moved little after the Bank of Japan's (BoJ) decision to leave the short-term interest rate target unchanged and remains depressed in the wake of weaker-than-expected domestic data released earlier this Wednesday. Apart from this, a modest US Dollar (USD) bounce, from a multi-month low touched on Tuesday, lifts the USD/JPY pair above mid-149.00s during the Asian session. 

The JPY bears, however, seem reluctant to place aggressive bets and opt to wait for BoJ Governor Kazuo Ueda's comments at the post-meeting press conference. Investors will look for cues about the timing and scope of future rate hikes by the BoJ, which, in turn, will drive the JPY. The focus will then shift to the outcome of a two-day FOMC meeting, which will drive the USD and the USD/JPY pair. 

Japanese Yen sticks to weaker-than-expected domestic data-inspired intraday losses

  • The Bank of Japan (BoJ) announced on Wednesday that it maintained the short-term interest rate target in the range of 0.40%- 0.50% after concluding its two-day monetary policy review meeting. In the accompanying policy statement, the central bank noted that the uncertainty surrounding Japan's economy, prices remains high.
  • Data released earlier this Wednesday showed that Japan's Trade Balance shifted to a surplus of ¥584.5 billion in February from a deficit of ¥415.43 billion in the same month a year earlier. The reversal was driven by a surge in exports, which increased by 11.4% YoY, and a larger-than-expected fall of 0.7% in imports. 
  • Meanwhile, Japan’s Machinery Orders fell 3.5% MoM in January 2025, significantly worse than the 1.2% decline registered in the previous month. On an annual basis, Machinery Orders rose 4.4% during the reported month, slightly above December’s 4.3% increase, though the reading was below the 6.9% forecast.
  • Adding to this, a Reuters Tankan poll indicated that business sentiment among Japanese manufacturers worsened for the first time in three months during March amid concerns about US tariff policies and weakness in China’s economy. In fact, the manufacturers’ index came in at -1, down from +3 in February. 
  • The results of Japan's annual spring labor negotiations, which concluded on Friday, showed that firms largely agreed to union demands for strong wage growth for the third straight year. This could boost consumer spending and contribute to rising inflation, giving the BoJ headroom to keep hiking rates.
  • Investors on Wednesday will also focus on the outcome of a two-day FOMC monetary policy meeting, due to be announced later during the US session. Heading into the key central bank event risks, a modest US Dollar recovery from a multi-month low pushes the USD/JPY pair back above mid-149.00s.

USD/JPY bulls might need to wait for a move beyond 150.00 before placing fresh bets

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From a technical perspective, the recent breakout above the 100-period Simple Moving Average (SMA) on the 4-hour chart was seen as a key trigger for bulls. Moreover, oscillators on the said chart are holding comfortably in positive territory and support prospects for additional gains. That said, the overnight failure ahead of the 150.00 psychological mark warrants some caution. Hence, it will be prudent to wait for a sustained strength beyond the said handle before positioning for a move towards the 150.75-150.80 region, or the 200-period SMA on the 4-hour chart, en route to the 151.00 round figure. 

On the flip side, the 149.20 area, followed by the 149.00 mark and the 148.80 region (100-period SMA on the 4-hour chart) should act as immediate support. A convincing break below the latter will suggest that the recent move-up witnessed over the past week or so has run out of steam and drag the USD/JPY pair to the 148.25-148.20 support en route to the 148.00 mark. The downward trajectory could extend further towards the 147.70 area, 147.20 region, and the 147.00 mark before spot prices eventually drop to retest a multi-month low, around the 146.55-146.50 region touched on March 11.

Japanese Yen FAQs

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.