Market Data 
- The Japanese Yen attracts some intraday buyers on Friday, though the upside seems limited.
- The mixed Japanese macro data boosts the case for further BoJ rate hikes and backs the JPY.
- The Fed’s hawkish pause favors the USD bulls and supports USD/JPY amid trade optimism.
The Japanese Yen (JPY) builds on the steady intraday ascent heading into the European session and moves further away from a four-week low touched against its American counterpart earlier this Friday. Rising geopolitical tensions help revive safe-haven demand. Adding to this, bets that the Bank of Japan (BoJ) will hike interest rates again, bolstered by the upbeat Household Spending data from Japan, drive some flows towards the JPY. Furthermore, a modest US Dollar (USD) pullback from a nearly one-month high contributes to the USD/JPY pair’s retracement slide from levels beyond the 146.00 mark.
Meanwhile, the US-UK trade deal adds to the optimism led by the US-China tariff negotiations over the weekend and eases US recession fears. This remains supportive of a generally positive tone around the equity markets and might hold back the JPY bulls from placing aggressive bets. Moreover, the Federal Reserve’s (Fed) hawkish pause earlier this week should limit any meaningful decline for the Greenback and the USD/JPY pair. Traders now look forward to speeches from a slew of influential FOMC members for some cues about the rate-cut path and grab short-term opportunities heading into the weekend.
Japanese Yen is underpinned by reviving safe-haven demand, bets for further BoJ rate hikes
- Government data released earlier this Friday showed that Japan’s household spending rose 0.4% in March and 2.1% from a year earlier, both surpassing market forecasts. Adding to this, expectations that sustained wage hikes will boost consumer spending and inflation in Japan suggest that the Bank of Japan may not abandon its rate-hike plans altogether.
- In fact, minutes from the BoJ’s monetary policy meeting held on March 18-19 revealed on Thursday that the central bank remains ready to hike interest rates further if inflation trends hold. This, in turn, backs the case for further policy tightening by the BoJ in 2025 and assists the Japanese Yen to gain some positive traction during the Asian session on Friday.
- Separately, Japanese real wages decreased for a third consecutive month in March. In fact, inflation-adjusted wages dropped 2.1% from a year earlier following a revised 1.5% fall in February and a 2.8% decline in January. Furthermore, the consumer inflation rate used to calculate real wages rose 4.2% YoY in March, down slightly from 4.3% in the previous month.
- The data adds to worries about Japan’s growth outlook amid the uncertainty over US tariffs and ahead of a first-quarter Gross Domestic Product report next week. This, in turn, could act as a headwind for the JPY amid the upbeat market mood, led by the optimism over the US-UK trade deal and the start of US-China tariff negotiations in Switzerland over the week.
- Meanwhile, positive developments help to ease market concerns that an all-out trade war might trigger a US recession. Adding to this, the Federal Reserve’s signal that it is not leaning towards cutting interest rates anytime soon, despite the heightened economic uncertainty, lifts the US Dollar to a four-week high, which, in turn, should lend support to the USD/JPY pair.
- There isn’t any relevant market-moving economic data due for release from the US on Friday. However, scheduled speeches from a slew of influential FOMC members will drive the USD demand later during the North American session. Furthermore, the broader risk sentiment should contribute to producing short-term trading opportunities on the last day of the week.
USD/JPY could stall intraday corrective slide near 200-period SMA breakpoint, around 145.00
From a technical perspective, the USD/JPY pair’s overnight breakout through the 200-period Simple Moving Average (SMA) on the 4-hour chart could be seen as a key trigger for bullish traders. Moreover, oscillators on the daily chart have started gaining positive traction and are holding in bullish territory on hourly charts. This supports prospects for the emergence of some dip-buyers at lower levels, which should limit the downside for spot prices near the 145.00 psychological mark (200-period SMA on the 4-hour chart). That said, a convincing break below the said resistance-turned-support might prompt some technical selling and drag the currency pair to the next relevant support near the 144.45 region.
Meanwhile, bulls might now wait for a sustained move and acceptance above the 146.00 round figure before placing fresh bets. Some follow-through buying beyond the Asian session peak, around the 146.15-146.20 region, will reaffirm the near-term positive outlook and pave the way for a further near-term appreciating move for the USD/JPY pair. The subsequent move up could lift spot prices to an intermediate hurdle near the 146.75-146.80 region en route to the 147.00 mark. The momentum could extend further towards the 147.70 horizontal resistance before the pair aims to conquer the 148.00 round figure and climb further towards the 148.25-148.30 supply zone.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
