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Japanese yen gains ground after inflation data and speech by BoJ Governor Ueda

  • The Japanese yen rises after BoJ Governor Kazuo Ueda’s speech.
  • Japan's national consumer price index (CPI) rose 2.8% in July from the same period last year, remaining at its highest level since February.
  • Fed Chairman Powell may make a statement on possible rate cuts at the Jackson Hole Symposium.

The Japanese yen (JPY) is gaining against the US dollar (USD) after the release of the national consumer price index (CPI) inflation data and Bank of Japan (BoJ) Governor Kazuo Ueda's speech in parliament on Friday. Ueda stated that “the BoJ raised interest rates in July as the economy and inflation developed broadly in line with forecasts.”

BoJ chief Ueda also indicated that there would be no change in the stance on adjusting monetary easing if economic activity and inflation continue to be in line with forecasts. Ueda noted that the BoJ's recent monetary policy decisions have been appropriate and warned that outlining the future policy stance could lead to unnecessary speculation.

Read more about BoJ Ueda's speech: The central bank raised interest rates in July as the economy and inflation moved largely in line with forecast

The USD/JPY pair is declining as the US dollar comes under downward pressure from lower US Treasury yields. However, the greenback regained ground following mixed S&P Global Purchasing Managers Index (PMI) data released on Thursday.

In addition, US Federal Reserve (Fed) Chairman Jerome Powell will speak at the Jackson Hole Symposium later on Friday. Powell may make a statement on possible interest rate cuts in the United States (US), which is eagerly awaited by market participants.

Daily overview of market drivers: Japanese yen rises after speech by BoJ Governor Ueda

  • Japan's national consumer price index rose 2.8% year-on-year in July, maintaining that level for the third consecutive month and remaining at its highest level since February. In addition, the national consumer price index excluding fresh food rose 2.7%, in line with expectations and the highest level since February.
  • The US Composite PMI fell slightly to 54.1 in August, a four-month low, from 54.3 in July, but above market expectations of 53.5. This indicates a continued expansion in US business activity, which has now recorded 19 consecutive months of growth.
  • The S&P Global US Services PMI rose to 55.2 in August 2024 from 55.0 in July, defying expectations for a decline to 54.0. The Manufacturing PMI, meanwhile, fell to 48.0 in August from 49.6 the previous month, falling short of market expectations of 49.6, signaling the second consecutive decline in US factory activity, the sharpest this year.
  • On Thursday, Federal Reserve Bank of Boston President Susan Collins expressed confidence that the U.S. central bank can lower inflation without triggering a recession and signaled her support for rate cuts next month. In an interview with Reuters in Jackson Hole, Collins said: “I think there is a clear path to achieving our goals without an unnecessary downturn and with a labor market that remains healthy.”
  • Jeff Schmid, president of the Kansas City Fed, mentioned in an interview with CNBC in Jackson Hole that he is closely studying the factors behind the rise in the unemployment rate and will rely on the data to decide whether to support a rate cut next month.
  • The FOMC minutes from its July monetary policy meeting show that most Fed officials agreed last month that they would likely cut their benchmark interest rate at the upcoming September meeting if inflation continued to cool.
  • Japan's trade balance posted a deficit of 621.84 billion yen in July, wiping out the 224.0 billion yen surplus reported in June and missing market estimates of a 330.7 billion yen deficit. Japan's imports rose 16.6% year-on-year in July to reach a 19-month high of 10,241.01 billion yen, up sharply from June's 3.2% increase. At the same time, exports rose 10.3% year-on-year to a seven-month high of 9,619.17 billion yen, falling short of market forecasts of 11.4%.

Technical Analysis: USD/JPY falls towards 145.50 around the downtrend line

USD/JPY is trading around 145.60 on Friday. Analysis of the daily chart shows that the pair is above a downtrend line, indicating a weakening of a bearish bias. However, the 14-day Relative Strength Index (RSI) remains just above 30, suggesting that the bearish trend may still be in play.

As a support level, the USD/JPY pair is testing the downtrend line at 145.50. A break below this level could strengthen the bearish bias and push the pair towards the region around the seven-month low of 141.69 recorded on August 5. A further decline could push the pair towards the support level at 140.25.

On the upside, the USD/JPY pair could face immediate resistance around the nine-day exponential moving average (EMA) at the 146.46 level. A break above the nine-day EMA could help the pair test the resistance level at 154.50, which has become the current resistance from the previous support.

USD/JPY: Daily chart

Japanese Yen price today

The table below shows the percentage change in the Japanese Yen (JPY) against major listed currencies today. The Japanese Yen was strongest against the US Dollar.

USD EUR GBP EUR CAD AUD NZD CHF
USD -0.14% -0.12% -0.47% -0.15% -0.23% -0.45% 0.14%
EUR 0.14% 0.02% -0.31% 0.00% -0.09% -0.07% 0.28%
GBP 0.12% -0.02% -0.34% -0.04% -0.11% -0.07% 0.02%
EUR 0.47% 0.31% 0.34% 0.31% 0.24% 0.24% 0.38%
CAD 0.15% -0.01% 0.04% -0.31% -0.08% -0.05% 0.06%
AUD 0.23% 0.09% 0.11% -0.24% 0.08% 0.03% 0.12%
NZD 0.45% 0.07% 0.07% -0.24% 0.05% -0.03% 0.10%
CHF -0.14% -0.28% -0.02% -0.38% -0.06% -0.12% -0.10%

The heatmap shows the percentage changes of the major currencies relative to each other. The base currency is selected from the left column, while the quote currency is selected from the top row. For example, if you select the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change shown in the box will be JPY (base)/USD (quote).

Frequently asked questions about the Japanese yen

The Japanese yen (JPY) is one of the most traded currencies in the world. Its value is largely determined by the performance of the Japanese economy, more specifically by the policies of the Bank of Japan, the difference between Japanese and US bond yields or the risk appetite of traders, among other factors.

One of the Bank of Japan's responsibilities is currency control, so its actions are crucial for the yen. The BoJ has sometimes intervened directly in foreign exchange markets, generally to lower the value of the yen, although it often refrains from doing so due to political concerns among its major trading partners. The BoJ's current ultra-loose monetary policy, based on massive economic stimulus, has led to a depreciation of the yen against its major counterpart currencies. This process has recently worsened due to a growing policy divergence between the Bank of Japan and other major central banks, which have opted to raise interest rates sharply to combat decades of high inflation.

The BoJ's stance of maintaining its ultra-loose monetary policy has led to a growing divergence in its policies with other central banks, particularly the US Federal Reserve. This is leading to a widening of the spread between the US and Japanese 10-year bonds, favoring the US dollar against the Japanese yen.

The Japanese yen is often viewed as a safe haven asset. This means that during times of market stress, investors are more likely to put their money into the Japanese currency because it is seen as reliable and stable. Turbulent times are likely to strengthen the yen's value against other currencies that are considered riskier.

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