Japanese Yen appreciates strongly
According to FXStreet, on January 21, the Japanese Yen (JPY) has recovered strongly thanks to recent statements by US President Donald Trump on imposing tariffs; at the same time, expectations that the Bank of Japan (BoJ) will raise interest rates this week and continue to increase the attractiveness of the Yen, an asset considered a safe haven in times of uncertainty.
Meanwhile, US Treasury yields continued to fall as the market expects the Fed to cut interest rates twice this year. The narrowing of the interest rate differential between the US and Japan has provided further support for the yen. However, the dollar has also shown signs of a slight recovery from its two-week low, easing pressure on the USD/JPY pair. All eyes are now on the crucial BoJ meeting, which begins on Thursday.
High expectations for BoJ rate hike
Recent hawkish comments from BOJ Governor Kazuo Ueda and Deputy Governor Ryozo Himino, coupled with rising inflation pressures in Japan, have increased the likelihood of a rate hike. Markets are now betting that the central bank will act by the end of this week.
The BoJ’s final decision will be based on an assessment of economic data, market developments and the impact of U.S. 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 25% tariffs on Canada and Mexico, with implementation as early as early February. The statements have raised concerns about inflation, which could force the Fed to maintain its rate-hike stance, while also boosting the dollar’s recovery from recent lows.
Japanese Finance Minister Katsunobu Kato said the BoJ will continue to implement appropriate policies to achieve its 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, Vice Minister of Finance for International Affairs, noted that the US economic outlook depends a lot on Mr. Trump's policies. He also questioned whether China's recent export strength can be maintained, emphasizing 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 slowing inflation. This led the market to believe that the Fed could consider cutting interest rates later this year. This development continued to put downward pressure on US Treasury yields and the US dollar.
There are no major economic data releases from Japan or the US today. Market focus remains on the BoJ's two-day policy meeting, which begins on Thursday, which is expected to determine the near-term direction of the 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.
