According to FXStreet, on January 22, the Japanese Yen (JPY) suddenly weakened along with increased purchases of USD (US Dollar), causing the USD/JPY pair to increase from its lowest level in more than a month. The positive sentiment of the stock market is also a factor weakening the Japanese Yen, which is a safe-haven asset. In addition, slightly rising US Treasury yields also supported the USD and put more pressure on the Japanese Yen.
However, the Japanese Yen may not fall sharply immediately, due to expectations that the Bank of Japan (BoJ) will raise interest rates at the end of the two-day policy meeting starting from Thursday. In addition, the possibility of the US Federal Reserve (Fed) cutting interest rates twice this year could have a negative impact on US and USD bond yields. Therefore, it is necessary to be cautious before confirming that the USD/JPY pair has reached a short-term bottom and will continue to increase.
With the central bank officials making strong comments, optimism about salary increases will help Japan achieve the 2% inflation target sustainably, supporting the forecast of the BoJ raising interest rates on Friday.
Japan's largest trade union leader - Tomoko Yoshino - also agreed that wages are on the rise. The BoJ has stressed that widespread and sustainable salary increases are a condition for a short-term rate hike.
In addition, Japanese Prime Minister Shigeru Ishiba will emphasize the need to increase wages strongly to overcome inflation in his upcoming policy speech. Japan's largest corporate union - Keidanren - and trade unions began negotiating a salary increase on Wednesday and predicted a significant salary increase, reinforcing the reason for the BoJ's interest rate hike.
The market is now expecting 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 global financial crisis in 2008.
US President Donald Trump has announced that he is considering imposing a 25% tariff on imports from Canada and Mexico starting in February, and may also impose a global tax. However, Trump has not announced a specific plan.
In addition, the US producer price index (PPI) and consumer price index (CPI) show that inflation is falling, reinforcing expectations that the US Federal Reserve will cut interest rates twice more this year.
Slight increases in US bond yields helped the USD recover from a two-week low and the USD/JPY pair recovered from a low of 154.75 on Tuesday.
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.
