Japanese Yen appreciates strongly
According to FXStreet, on January 21, the Japanese Yen (JPY) recovered strongly thanks to recent statements by US President Donald Trump about the tax; at the same time, it is expected that the Bank of Japan (BoJ) will raise interest rates this week and continue to increase the attractiveness of the Yen, an asset considered safe in times of uncertainty.
Meanwhile, US Treasury yields continue to fall as the market expects the Fed to cut interest rates twice this year. The narrowing interest rate differential between the US and Japan has further supported the Yen. However, the US dollar also showed signs of a slight recovery from its lowest level in the past two weeks, helping to ease pressure on the USD/JPY pair. All eyes are now on the key BoJ meeting, which starts on Thursday.
High expectations for BoJ to increase interest rates
Recent "Havy" statements from BoJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino, along with rising inflationary pressures in Japan, have increased the likelihood of the BoJ raising interest rates. Currently, the market is betting 80% that the central bank will take action this weekend.
The BoJ's final decision will be based on an assessment of economic data, market developments and the impact of US economic policy. Some Japanese officials are also concerned that President Trump's trade policies could disrupt global markets or change economic expectations.
Concerns about the impact of US policy
US President Donald Trump has announced his intention to impose a 25% tariff on Canada and Mexico, with the earliest implementation date in early February. These statements have raised concerns about inflation, which could force the Fed to maintain a rate-cutting stance while boosting the USD's recovery from its recent lows.
Japanese Finance Minister Katsunobu Kato said that the BoJ will continue to implement appropriate policies to achieve the 2% inflation target. He also stressed that Japan will respond promptly based on US economic policies and closely monitor their impact on the global economy.
In addition, Mr. Atsushi Mimura, Deputy Secretary of the Treasury Department in charge of international affairs, noted that the outlook for the US economy depends largely on Mr. Trump's policies. He also questioned whether China's recent export strength could be maintained and stressed that this is a factor to watch.
US economic data, including the Producer Price Index (PPI) and Consumer Price Index (CPI) released last week, showed signs of declining inflation. This has led the market to believe that the Fed could consider cutting rates later this year. This development continues to put downward pressure on US Treasury yields and the USD.
Currently, no major economic data was released from either Japan or the US today. The focus of the market is still the BoJ's two-day policy meeting, starting on Thursday, which is expected to decide the short-term direction of the Japanese Yen.
According to Lao Dong, updated at 12:00 on January 21, the USD/JPY exchange rate is currently fluctuating around 155.116 USD/JPY, meaning 1 USD can be exchanged for about 155 JPY.
