Japanese GDP Disappoints, BOJ Rate Hike Expectations Ease
The USD/JPY pair started the week with gains, breaking through the 153.00 level in the Asian session, breaking a five-day losing streak. This gain came after the release of Japan's fourth-quarter 2025 GDP data, which disappointed the market and weakened the yen.
Data from the Cabinet Office of Japan showed that the Japanese economy grew 0.1% in the fourth quarter of 2025, improving from a 0.7% contraction in the previous quarter. However, this figure was below market expectations, reducing confidence that the Bank of Japan (BoJ) would raise interest rates anytime soon.
In addition to the data, a risk-on market sentiment also dampened the yen's appeal as a safe-haven asset. This combination provided room for USD/JPY to rise, although market participants considered the upside potential limited due to restraining factors from the US dollar.
Domestically, the weaker data was also seen as providing a rationale for Prime Minister Sanae Takaichi to push for additional stimulus policies. However, some market participants remain hopeful that the policies implemented will maintain fiscal discipline and support the recovery, which could ultimately encourage the Bank of Japan to continue its gradual policy normalization path—a factor that could potentially support the yen.
From the United States, the US dollar has yet to receive strong support as the market still holds onto expectations that the Federal Reserve will ease policy this year. After the latest inflation data was deemed more manageable, dollar buying interest tended to be restrained, limiting room for USD/JPY appreciation.
Referring to market forecasts based on FedWatch, the probability of a Fed rate cut has strengthened again, especially after US consumer inflation rose 0.2% and core inflation rose 0.3% in January. This data is considered to offset the positive impact of the previously strong Nonfarm Payrolls report, keeping the dollar on the defensive and potentially preventing USD/JPY from gaining too aggressively. (asd)
Source: Newsmaker.id
