The Japanese Yen (JPY) weakened sharply on Thursday, with USD/JPY climbing to its highest level since February after the Bank of Japan (BoJ) kept its policy rate unchanged at 0.50%. At the time of writing, the pair trades around 154.16, up nearly 0.9% on the day.
BoJ maintains cautious stance amid fragile recovery
The BoJ has now held interest rates steady for five consecutive meetings, following January’s landmark rate hike the first in 17 years which lifted the benchmark from 0.25% to 0.50%. Thursday’s decision underscores the central bank’s cautious approach as it navigates a delicate economic recovery pressured by global uncertainties.
The decision was not unanimous, with two board members, Naoki Tamura and Hajime Takata, voting for a 25-basis-point increase to 0.75%. BoJ Governor Kazuo Ueda reiterated a careful tone in his post-meeting comments, noting that the bank will “take a little longer to see how US tariff impacts would affect the Japanese economy.”
Ueda added that policymakers will consider raising rates “if the economy and prices move in line with our forecast,” while highlighting that further assessment of wage growth trends is essential before committing to additional tightening.
Key Japanese data in focus ahead of December BoJ meeting
Attention now shifts to Japan’s upcoming economic indicators, scheduled for release on Friday, which could shape expectations for the BoJ’s final policy meeting of the year on December 18–19. The data docket includes the Tokyo Consumer Price Index (CPI), unemployment figures, industrial production, and retail sales. Swap market pricing currently implies a 25–30% probability of a rate hike at December’s meeting.
Fed’s cautious stance supports USD rally
The Yen’s decline was compounded by renewed US Dollar (USD) strength following the Federal Reserve’s (Fed) latest policy decision. Although the Fed implemented a widely anticipated 25-basis-point rate cut, Chair Jerome Powell stressed that “a further reduction in the policy rate at the December meeting is not a foregone conclusion,” signaling a more data-dependent approach.
The US Dollar Index (DXY), which tracks the greenback against six major peers, extended gains to a three-month high, trading near 98.53 at the time of writing.
