Recorded at 10:49 am on June 16 on Investing. com, the USD/JPY exchange rate pair was at 160.22 yen per 1 USD, down 0.09 points, equivalent to 0.06%. This shows that the Yen edged up slightly against the USD in the session, but is still in a weak zone as the exchange rate is still very close to the 52-week high of 160.74 yen/USD.
According to Investing.com, the Bank of Japan (BOJ) has raised interest rates by another 25 basis points, bringing the benchmark overnight interest rate to 1.0%. This is the highest level in 31 years, showing that Japan continues to move away from the period of maintaining a multi-year ultra-loose monetary policy.
The decision to raise interest rates was predicted by the market in advance, so the reaction of the Yen was not too strong. After this information, USD/JPY only slightly decreased to 160.22.
When USD/JPY decreases, the Yen strengthens. The 160 yen per 1 USD level is still a high exchange rate zone, reflecting the pressure to depreciate the Japanese currency.
Looking at the short-term chart, USD/JPY fluctuated quite narrowly during the day, with a range from 160.05 to 160.37. The price line had a sharp decline in the previous session, then recovered around the 160.2 zone.
In 1 day, the exchange rate pair decreased by 0.06%; in 1 week decreased by 0.09%. However, considering the longer period, USD/JPY still increased by 0.91% in 1 month, increased by 3.55% in 6 months and increased by 10.70% in 1 year. This shows that the Yen is still under significant downward pressure compared to the USD.
The main reason why the BOJ continues to tighten policy is persistent inflation in Japan. The BOJ warns that the increase in crude oil prices is being transferred to transaction prices between businesses, which may spread to consumer prices. If this trend continues, inflation is at risk of exceeding the central bank's target of 2%.
In addition to raising interest rates, BOJ also announced plans to reduce the monthly bond buying rate. The central bank plans to reduce the scale of bond purchases by about 200 billion Yen per quarter until March 2027. After that, BOJ will maintain the monthly bond purchase level of about 2,000 billion Yen and may adjust if necessary.
Reducing bond purchases is often understood as a monetary tightening step. When central banks buy less bonds, the amount of money pumped into the market decreases, which can support the domestic currency. However, with the Yen, the impact depends on the interest rate difference between Japan and the US, the strength of the USD as well as the diễn biến of imported energy prices.
From a market perspective, the BOJ's interest rate hike is a supporting signal for the Yen. However, the slight increase in the session shows that investors are still cautious. If the USD continues to strengthen or Japan's import inflation has not cooled down, the Yen may still find it difficult to recover strongly in the short term.
