Japanese Yen Continues to Gain as USD Weakens
The Japanese Yen (JPY) continued its upward momentum in today's trading session, dragging USD/JPY below 154.00. The main reason was that the stronger-than-expected Producer Price Index (PPI) data from Japan reinforced expectations that the Bank of Japan (BoJ) will continue to raise interest rates. In addition, falling US Treasury yields also provided additional support for the lower-yielding JPY.
However, not all is well for the yen. Concerns about the impact of steel and aluminum tariffs proposed by former US President Donald Trump, along with possible retaliation from other countries, could weigh on the Japanese economy. Meanwhile, the US Federal Reserve’s hawkish stance on monetary policy, especially after stronger-than-expected US inflation data, could help limit further losses for the USD. This means investors should think carefully before betting on a sharp decline in USD/JPY.
The latest data showed that Japan's Producer Price Index (PPI) rose 0.3% in January and was up 4.2% year-on-year. This is a sign that inflation is spreading in Japan, especially when combined with recent wage growth, increasing the likelihood that the Bank of Japan (BoJ) will continue to raise interest rates.
BOJ Governor Kazuo Ueda and Deputy Governor Himino have also recently hinted at the possibility of another rate hike if the economy and inflation continue to perform as expected. However, investors remain cautious, concerned that former US President Donald Trump's tough tariff policies could negatively impact the Japanese economy.
Meanwhile, the latest inflation data from the US showed that the Consumer Price Index (CPI) rose 0.5% in January – the strongest increase since August 2023 and higher than forecast. Annual inflation also edged up to 3%, while the core CPI (excluding food and energy) reached 3.3%, higher than the expected 3.1%. This further reinforced the view that the Fed will continue to maintain tight monetary policy to control inflation.
The 10-year US Treasury yield also recorded its biggest increase since December, widening the yield differential between the US and Japan. Investors now turn their attention to US PPI data and weekly jobless claims, which could have a significant impact on the US dollar and USD/JPY in the coming period.
According to Lao Dong's records at 3:00 p.m. on February 13, 2025, the Yen increased to 154.120 USD/JPY.
