Japanese Yen pauses recent rally due to dovish comments from upcoming PM Ishiba
- The Japanese Yen weakened as upcoming PM Shigeru Ishiba said that the monetary policy should continue to be accommodative.
- Japan's Retail Trade rose by 2.8% YoY in August, surpassing the expected 2.3% rise.
- August’s US Core PCE Price Index MoM has reinforced the possibility of an aggressive Fed rate-cutting cycle.
The Japanese Yen (JPY) edges lower against the US Dollar (USD) on Monday after dovish comments from Japan's upcoming Prime Minister, former Defense Chief Shigeru Ishiba. Ishiba stated on Sunday that the country's monetary policy should continue to be accommodative, indicating the necessity of maintaining low borrowing costs to support a fragile economic recovery, according to The Japan Times.
Japan's Retail Trade increased by 2.8% year-on-year in August, surpassing market expectations of 2.3% and slightly exceeding the upwardly revised 2.7% rise from the previous month. On a month-over-month basis, seasonally adjusted Retail Trade rose by 0.8%, marking the largest increase in three months, following a 0.2% gain in July.
The US Dollar received downward pressure following Friday’s US Core Personal Consumption Expenditures (PCE) Price Index data for August, which aligns with the US Federal Reserve's (Fed) inflation outlook. This has reinforced the possibility of an aggressive rate-cutting cycle by the central bank.
The CME FedWatch Tool indicates that markets are assigning a 42.9% probability to a 25 basis point rate cut by the Federal Reserve in November, while the likelihood of a 50-basis-point increased to 57.1%, up from 50.4% a week ago.
Daily Digest Market Movers: Japanese Yen receives downward pressure from doubts over BoJ policy outlook
- Japan's Chief Cabinet Secretary, Yoshimasa Hayashi, refrained from commenting on Monday's daily stock market fluctuations. Hayashi emphasized the importance of closely monitoring the economic and financial situation both domestically and internationally with a sense of urgency. He also noted the need for ongoing collaboration with the Bank of Japan.
- St. Louis Federal Reserve President Alberto Musalem stated on Friday, according to the Financial Times, that the Fed should begin cutting interest rates "gradually" following a larger-than-usual half-point reduction at the September meeting. Musalem acknowledged the possibility of the economy weakening more than anticipated, saying, "If that were the case, then a faster pace of rate reductions might be appropriate."
- The US Core Personal Consumption Expenditures (PCE) Price Index for August increased by 0.1% month-over-month, falling short of market expectations of a 0.2% rise and lower than the previous 0.2% increase. Meanwhile, the Core PCE on a year-over-year basis rose by 2.7%, matching expectations and slightly above the prior reading of 2.6%.
- The Tokyo Consumer Price Index (CPI) increased 2.2% year-over-year in September, down from a 2.6% rise in August. Meanwhile, the CPI excluding fresh food and energy climbed 1.6% YoY in September, unchanged from the previous reading. The CPI excluding fresh food increased 2.0% as expected, compared to the previous rise of 2.4%.
- US Gross Domestic Product Annualized increased at a rate of 3.0% in the second quarter, as previously estimated, according to the US Bureau of Economic Analysis (BEA) on Thursday. Meanwhile, the GDP Price Index rose 2.5% in the second quarter.
- On Thursday, the BoJ Monetary Policy Meeting Minutes expressed the members’ consensus on the importance of remaining vigilant regarding the risks of inflation exceeding targets. Several members indicated that raising rates to 0.25% would be suitable as a way to adjust the level of monetary support. A few others suggested that a moderate adjustment to monetary support would also be appropriate.
- Last week, BoJ Governor Kazuo Ueda indicated that the central bank has time to evaluate market and economic conditions before making any policy adjustments, signaling that there is no urgency to raise interest rates again. Ueda also noted that Japan's real interest rate remains deeply negative, which is helping to stimulate the economy and drive up prices.
Technical Analysis: USD/JPY remains above 142.00 after breaking below the ascending channel
USD/JPY trades around 142.20 on Monday. Analysis of the daily chart indicates that the pair has broken below the ascending channel pattern, signaling a momentum shift from a bullish to a bearish bias. Furthermore, the 14-day Relative Strength Index (RSI) is situated below the 50 level, indicating a bearish sentiment is in play.
In terms of support, the USD/JPY pair may navigate around the 139.58 region, the lowest point since June 2023.
On the upside, a return to the ascending channel could weaken the bearish case and lead the USD/JPY pair to test the nine-day Exponential Moving Average (EMA) at the 143.10 level. A break above this level could support the pair to test the upper boundary of the ascending channel at 146.20 level, followed by its five-week high of 147.21 level, which was recorded on September 3.
USD/JPY: Daily Chart
Japanese Yen PRICE Today
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies today. Japanese Yen was the weakest against the Australian Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | 0.01% | -0.13% | -0.16% | -0.04% | -0.51% | -0.60% | -0.04% | |
| EUR | -0.01% | -0.13% | -0.16% | -0.03% | -0.46% | -0.58% | 0.03% | |
| GBP | 0.13% | 0.13% | 0.10% | 0.10% | -0.33% | -0.45% | 0.15% | |
| JPY | 0.16% | 0.16% | -0.10% | 0.15% | -0.43% | -0.43% | 0.15% | |
| CAD | 0.04% | 0.03% | -0.10% | -0.15% | -0.42% | -0.55% | 0.05% | |
| AUD | 0.51% | 0.46% | 0.33% | 0.43% | 0.42% | -0.12% | 0.48% | |
| NZD | 0.60% | 0.58% | 0.45% | 0.43% | 0.55% | 0.12% | 0.58% | |
| CHF | 0.04% | -0.03% | -0.15% | -0.15% | -0.05% | -0.48% | -0.58% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).
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 current BoJ ultra-loose monetary policy, based on massive stimulus to the economy, has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation.
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 supports a widening of the differential between the 10-year US and Japanese bonds, which favors the US Dollar against the Japanese Yen.
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.