According to Lao Dong, on May 14, the Japanese Yen (JPY) continued to increase against the US Dollar (USD), causing the USD/JPY pair to decrease to nearly 147 - the lowest level of the day.
This movement marks the second consecutive increase of Dong Yen, in the middle of the market context is in favor of the possibility that the Central Bank of Japan (BOJ) will continue to raise interest rates, while the US Federal Reserve (Fed) may soon start the interest rate cut cycle this year.
The main motivation to promote the rising momentum of JPY comes from the "hawk" statement of Deputy Governor Boj - Mr. Shinichi Uchida. He affirmed that Boj is willing to continue raising interest rates if growth and inflation are expected. In the context of inflation in Japan, which is stable around the target, the market assesses that BoJ will gradually withdraw from the super monetary policy that lasts over the past decade.
In contrast, in the US, April consumer inflation data showed a cooling trend. Specifically, the total CPI decreased to 2.3% over the same period last year (compared to 2.4% in March), while the core CPI remained at 2.8% - in line with expectations. This reinforces expectations that the Fed will start cutting interest rates from the second half of 2025. Currently, the market is pricing in about 56 basis points of cut this year.
The difference in monetary policy orientation between BoJ and Fed is creating a clear advantage for the Yen. While the Fed is about to "rotate the shaft", BoJ is getting closer to the policy normalize. This is the factor that supports the increase in JPY in short and medium term.
With the current context, analysts think that USD/JPY may continue to be under pressure to decrease in the coming sessions. If the exchange rate breaks the support of 147, the next goal may be region 146.50 or lower. However, the decline may be limited if the global risk psychology is strongly improved, reducing demand for shelter properties like JPY.
