Yen Backs Up: Signaling a Rate Hike or Just Bluffing?
The Japanese yen has begun to recover slightly after a sharp decline against the US dollar, as domestic data shows persistent pressure on service prices and rising labor costs. This has the market wondering: the Bank of Japan will likely remain on a path of policy normalization, slowly but surely, as Japanese inflation has remained above its 2% target, driven not only by energy prices but also by domestic factors such as wages. Expectations are that the BoJ is still open to a gradual interest rate hike in the fourth quarter or early next year, even though its current benchmark rate remains very low at around 0.5%.
But the market also knows this isn't as simple as "JPY strengthens, BoJ raises interest rates now." The new Prime Minister, Sanae Takaichi, is pushing for a large fiscal stimulus and tends to favor looser policy, as she wants to support growth and maintain household purchasing power—not rush into tightening. This has led many traders to hold off on aggressive bets on the yen, while awaiting two major events this week: the two-day Bank of Japan (BoJ) meeting, which is likely to keep interest rates unchanged, and the US Fed's decision, which will likely move the dollar. This means that the future movement of USD/JPY will still be determined by a combination of Tokyo politics and Washington's interest rate signals. (az)
Source: Newsmaker.id
