The Japanese yen slipped to around 149 per dollar on Friday, snapping a two-day advance as investors digested the latest inflation data and broader global economic developments.
Japanese yen slips to around 149 per dollar
Japan’s core inflation rate slowed to 3% in February from 3.2% in January but remained above market forecasts of 2.9%. This marked the second consecutive month that inflation exceeded expectations, underscoring persistent price pressures and reinforcing the case for further interest rate hikes by the Bank of Japan (BOJ).
Earlier this week, the BOJ left its policy rate unchanged at 0.5%, as widely anticipated, opting for a cautious approach amid ongoing global economic uncertainties. Policymakers emphasized the need to assess the potential impact of external risks, including the fallout from higher US tariffs and slowing global demand, on Japan’s economy. The central bank also reiterated its commitment to closely monitoring foreign exchange markets, as excessive yen weakness could contribute to imported inflation and disrupt economic stability.
Selling pressure from a strengthening US dollar
Meanwhile, the yen faced renewed selling pressure from a strengthening US dollar, which gained traction after Federal Reserve Chair Jerome Powell signaled that the central bank is in no rush to lower interest rates. This divergence in monetary policy expectations between the BOJ and the Fed continued to weigh on the yen, making it less attractive to investors seeking higher-yielding assets. Additionally, concerns over Japan’s economic outlook persisted, with mixed signals from recent economic indicators suggesting a fragile recovery.
Focus on further guidance from Japanese officials
Investors are now closely watching for further guidance from Japanese officials, particularly regarding potential BOJ policy adjustments and government interventions to stabilize the currency. Market participants remain on alert for verbal intervention from authorities, as Japanese officials have previously expressed concerns over excessive yen weakness and its potential impact on inflation and economic confidence.
