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Japanese Yen trims a part of intraday losses amid hawkish BoJ expectations – Crypto News

Published

3 days ago

February 21, 2025

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The Japanese Yen weakened after Japan’s Finance Minister Katsunobu Kato’s comments on Friday.
Japan’s strong National CPI print reaffirms BoJ rate hike bets and should limit losses for the JPY.
The underlying USD bearish sentiment might also contribute to keeping a lid on the USD/JPY pair.

The Japanese Yen (JPY) slumps nearly 150 pips intraday against its American counterpart in reaction to comments from Japan’s Finance Minister, Katsunobu Kato, saying that higher long-term rates can pressure Japan’s fiscal situation. Moreover, Bank of Japan (BoJ) Governor Kazuo Ueda fueled speculations about a possible intervention to curb the rise in the Japanese government bond (JGB) yields and undermine the JPY.

Meanwhile, Japan’s strong National Consumer Price Index (CPI) print released earlier this Friday reaffirmed expectations that the BoJ would hike interest rates further. This remains supportive of elevated JGB yields. The resultant narrowing of the rate differential between Japan and other countries helps limit losses for lower-yielding JPY. Moreover, a weaker tone surrounding the US Dollar (USD) caps the USD/JPY pair.

Japanese Yen bulls have the upper hand amid rising bets for additional BoJ rate hike

Japan’s Finance Minister, Katsunobu Kato, warned this Friday that higher Japanese government bond yields will increase debt-servicing costs, which, in turn, may impact Japan’s finances. This overshadows the stronger-than-expected release of Japan’s National Consumer Price Index (CPI) and prompts some intraday selling around the Japanese Yen.
BoJ Governor Kazuo Ueda noted that a rise in long-term interest rates will push up corporate funding costs, but also need to take into account how the improving economy will underpin their profits. If markets make abnormal moves, we stand ready to respond nimbly, such as through market operations to smooth market moves, Ueda added further.
The latest data released by the Statistics Bureau of Japan showed that the headline National CPI climbed to a two-year high of 4.0% YoY in January from 3.6% in the previous month. Meanwhile, the Core CPI, which excludes volatile fresh food items, grew 3.2% from the previous year, compared to 3.0% recorded in December and touching a 19-month high.
Furthermore, a core CPI reading that excludes both fresh food and fuel costs rose 2.5% in January from a year earlier, marking the fastest pace since March 2024. The data underscores rising inflationary pressure in Japan that has drawn hawkish remarks from several BoJ policymakers, which, in turn, should limit any meaningful depreciating move for the JPY.
Moreover, expectations that sustained wage gains could spur consumer spending suggest that the BoJ could hike interest rates more aggressively than initially thought. This keeps the benchmark 10-year JGB yield elevated near its highest level since November 2009 and should continue to act as a tailwind for the lower-yielding JPY in the near term.
A private-sector survey showed that Japan’s factory activity extended declines for an eighth straight month in February but at a slower pace. The au Jibun Bank Japan flash Manufacturing Purchasing Managers’ Index (PMI) rebounded to 48.9 from a 10-month low of 48.7 in January. In contrast, the gauge for the services sector improved to 53.1 from 53.0.
The US Dollar touched its lowest level since December 10 on Thursday as a softer-than-anticipated sales forecast from Walmart raised doubt over US consumer health. This comes on top of worries that US President Donald Trump’s tariff plans and protectionist policies would boost inflation, which could further dent consumer spending.
Meanwhile, Federal Reserve officials remain wary of future interest rate cuts amid sticky inflation and the uncertainty over Trump’s policy moves. In fact, St. Louis Fed President Alberto Musalem warned on Thursday that rising inflation expectations combined with the risk of stubborn stagflation could create a double challenge for the US economy.
Earlier, Fed Board Governor Adriana Kugler said that US inflation still has some way to go to reach the 2% target and that its path toward that goal continues to be bumpy. However, Atlanta Fed president Raphael Bostic struck a dovish tone and sees room for two more rate cuts this year, though much depends on the evolving economic conditions.
Traders now look forward to the release of flash US PMIs for fresh insight into the economic health. Friday’s US economic docket also features the Existing Home Sales data and the revised Michigan Consumer Sentiment Index. This, along with speeches from FOMC members will drive the USD demand and provide some impetus to the USD/JPY pair.

USD/JPY remains vulnerable while below the 150.90-151.00 support-turned-resistance

From a technical perspective, the overnight breakdown through the 151.00-150.90 horizontal support and a subsequent fall below the 150.00 psychological mark was seen as a fresh trigger for bearish traders. Moreover, oscillators on the daily chart are holding deep in negative territory and are still away from being in the oversold zone. This, in turn, suggests that the path of least resistance for the USD/JPY pair is to the downside and any further move up could be seen as a selling opportunity near the 151.00 round figure.

Some follow-through buying, however, could trigger a short-covering rally and lift the USD/JPY pair to the 151.40 hurdle en route to the 152.00 round-figure mark. The recovery momentum, however, runs the risk of fizzling out rather quickly near the 152.65 area. The said barrier represents the very important 200-day Simple Moving Average (SMA), which if cleared decisively might shift the near-term bias in favor of bullish traders.

On the flip side, the 150.00 mark now seems to act as an immediate support ahead of the 149.30-149.25 region, or a multi-month low touched during the Asian session. This is closely followed by the 149.00 mark, below which the USD/JPY pair could slide further towards testing the December 2024 swing low, around the 148.65 region.

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.