According to FXStreet, on January 22, the Japanese Yen (JPY) suddenly weakened along with increased USD (US Dollar) buying, causing the USD/JPY pair to rise from its lowest level in more than a month. Positive sentiment in the stock market also weakened the Japanese Yen, which is considered a safe-haven asset. In addition, a slight increase in US Treasury yields also supported the USD and put additional pressure on the Japanese Yen.
However, the yen may not fall sharply immediately, as the Bank of Japan (BoJ) is expected to raise interest rates at the end of its two-day policy meeting starting Thursday. Moreover, the possibility of the US Federal Reserve cutting interest rates twice this year could have a negative impact on US bond yields and the USD. Therefore, caution is needed before confirming that the USD/JPY pair has reached a short-term bottom and will continue to rise.
With Bank of Japan officials making dovish comments, optimism that rising wages will help Japan sustainably reach its 2% inflation target has supported expectations that the BoJ will raise interest rates on Friday.
Japan's largest union leader, Tomoko Yoshino, also agreed that wages were on the rise. The BoJ has stressed that broad and sustained wage growth is a prerequisite for raising short-term interest rates.
In addition, Japanese Prime Minister Shigeru Ishiba will highlight strong wage increases that are outpacing inflation in an upcoming policy speech. Japan's largest business federation, Keidanren, and labor unions began wage-raising talks on Wednesday and are forecasting a significant increase, bolstering the case for the BoJ to raise interest rates.
Markets now expect the BoJ to raise interest rates from 0.25% to 0.5% at the end of its policy meeting on January 23-24, the highest level since the 2008 global financial crisis.
US President Donald Trump has announced that he is considering imposing a 25% tariff on goods imported from Canada and Mexico starting in February, and may impose a global tariff. However, Trump has not announced specific plans.
In addition, US producer price indexes (PPI) and consumer price indexes (CPI) showed inflation is falling, reinforcing expectations that the US Federal Reserve will cut interest rates two more times this year.
A slight rise in US bond yields helped the USD recover from two-week lows and the USD/JPY pair recovered from Tuesday's low of 154.75.
According to Lao Dong, updated at 12:00 on January 22, the USD/JPY exchange rate is currently fluctuating around 155.916 USD/JPY, meaning 1 USD can be exchanged for about 156 JPY.
