Japanese Yen strengthens as intervention woes linger
The Japanese Yen showed signs of strengthening overnight against the US dollar but has stayed comfortably above the 150 level, where it has been for the past two weeks.
Despite the BOJ's exit from ultra-loose policy at its last meeting, the currency has remained weak, as comments accompanying the decision indicated that the next rate hike will be some time away. The ten weakness is not what the Bank of Japan was expecting. In an interview to Asahi newspaper published this Friday, BOJ governor Kasuo Ueda warned that "If exchange-rate developments appear to have an impact on Japan's wage-inflation cycle in a way that's hard to dismiss, that would be a reason to respond with monetary policy". Ueda also said that the bumper wage hike increase of earlier this year has begun to give households purchasing power, and he expects inflation to pick up from summer towards autumn.
The Japanese Yen
The JPY has shown signs of strengthening overnight against the dollar, maintaining its position above the critical 150 level since March 19th, despite the Bank of Japan's slow move away from ultra-loose monetary policy. The BoJ Governor Ueda highlighted concerns over the Yen's weakness impacting wage inflation and signaled potential monetary policy responses if necessary.
A weak Yen raises import costs, affecting consumers and retailers. While some wage increases have boosted household purchasing power, inflation is expected to rise later in the year. The Yen has also strengthened against the Euro, with potential for Japanese intervention to limit its depreciation.
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