Japanese Yen slightly decreased but showed no signs of deep decline
On February 7, the Japanese Yen (JPY) decreased slightly after the International Monetary Fund (IMF) made cautious comments, helping the USD/JPY pair recover from its lowest level since December 10. However, a sharp decline in the JPY seems unlikely, as the market increasingly believes that the Bank of Japan (BoJ) will continue to raise interest rates.
In fact, a senior BoJ official recently stressed that the bank is still holding a stance to gradually raise interest rates, helping to narrow the gap with other central banks such as the US Federal Reserve (Fed). This supports the Yen and limits its decline. In addition, the value of the USD also did not fluctuate strongly before the US Employment Data (NFP) was released, contributing to keeping the USD/JPY pair stable.
Japanese Yen may continue to strengthen
The IMF warned Japan to monitor the impact of the BoJ's interest rate hike, especially the risk of increasing government debt costs and the number of bankrupt businesses.
A BoJ official said that if inflation continues to increase as expected, the bank will raise interest rates. Japan's economy minister also said the government is focusing on eliminating the mindset of reduce depreciation, raising the minimum wage and encouraging businesses to increase wages.
In addition, the BoJ report earlier this week showed policymakers are considering raising interest rates further in the future. New data also shows that real wages in Japan have increased for the second consecutive month, further strengthening the possibility of the BoJ continuing to tighten policy.
Meanwhile, Japanese government bond yields for the 10-year period are approaching a 14-year high, while US 10-year bond yields are at their lowest level since December. This reflects expectations that the Fed may slow down the pace of interest rate increases.
The US Treasury Secretary said the government is not too concerned about the Fed adjusting interest rates but focusing on cutting long-term bond interest rates. Some Fed officials also commented that although inflation has decreased significantly, the US labor market is still strong, not qualified for the Fed to cut interest rates soon.
Before the US National Employmentyment Service (NFP) data was released, many investors took profits and stayed out of the market, causing the USD/JPY pair to fluctuate slightly during the day.
According to Lao Dong at 12:00 on February 7, 2025, the Yen decreased to 151.679 USD/JPY, meaning 1 USD was exchanged for about 151 JPY.
