Yen continues to fall incredibly

Yesterday, the Bank of Japan (BOJ) kept its interest rate unchanged at 0.25%. Accordingly, this decision was made to assess the impact of financial markets and exchange rates on the Japanese economy and prices.

Following the announcement, the yen fell 1.27% against the US dollar, hitting 156.77 JPY/USD, its lowest level in more than four months.

Many economists had expected the BOJ to raise interest rates, but the decision to keep them unchanged came as a surprise. In contrast, the US Federal Reserve (Fed) cut interest rates to a range of 4.25%-4.5% a day earlier.

The BOJ's decision was passed with 8 votes in favor and 1 against. However, the BOJ said that the Japanese economy still has many uncertainties. The BOJ also found that businesses are raising wages and prices more than before. At the same time, the exchange rate now has a greater impact on prices than before.

BOJ Governor Kazuo Ueda warned that if the bank waits too long to raise interest rates, it will have to act more aggressively later. However, he said that current inflation is slow so the BOJ can adjust slowly.

The yen rebounded slightly today, December 20, after hitting a five-month low, helped by higher-than-expected Japanese consumer price index (CPI) data and a slight decline in US bond yields.

New data showed that the CPI rose 2.9% in November from a year earlier. The CPI excluding fresh food and energy also rose to 2.7%, up from the previous month. This has raised expectations that the BOJ could raise interest rates early next year. Governor Ueda also affirmed that the BOJ is ready to raise interest rates if the economy and prices continue to improve.

Meanwhile, US bond yields hit a six-month high, pushing up the value of the US dollar and putting pressure on the yen.

Investors are now awaiting data on the US personal consumption expenditure (PCE) price index, which is an important gauge to determine the next direction of the USD/JPY pair.

According to Lao Dong, updated at 1:00 p.m. on December 20, the USD/JPY exchange rate is currently fluctuating around 156.902 USD/JPY, meaning 1 USD can be exchanged for about 157 JPY.