USD/JPY is losing ground after recording gains from the previous session, reaching a level of around 155.90 during Asian hours on Wednesday. The pair is seeing losses as the US dollar (USD) remains frail after US President Donald Trump delivered his first State of the Union (SOTU) address of his second administration before a joint session of Congress.
Trump said he had overseen a “coup for the ages” and touted his economic achievements, focusing on lower inflation. Trump further stated that his administration has made efforts to stop illegal immigration and fentanyl from crossing the border. He threatened to impose higher tariffs on countries that “gamble” in recent trade deals after the Supreme Court blocked many sweeping global tariffs.
USD/JPY’s decline may be halted as the Japanese yen (JPY) may decline amid reports suggesting that Japanese Prime Minister (PM) Sanae Takaichi expressed concerns about further interest rate increases during last week’s meeting with Bank of Japan (BoJ) Governor Kazuo Ueda.
BoJ Governor Ueda, however, said the discussion broadly covered economic and financial developments, adding that the prime minister did not present any specific proposals on monetary policy.
Japan’s Deputy Chief Cabinet Secretary Masanao Ozaki said on Wednesday that the details of monetary policy should be left to the Bank of Japan. Meanwhile, Prime Minister Sanae Takaichi said she would closely monitor currency movements with a particular sense of urgency.
Japanese Yen FAQs
The Japanese yen (JPY) is one of the most frequently traded currencies in the world. Its value is largely determined by, among other things, the performance of the Japanese economy, but in particular the policy of the Bank of Japan, the difference between the yields of Japanese and American bonds, and the risk sentiment of investors.
One of the tasks of the Bank of Japan is currency control, so its movements are crucial for the yen. The BOJ has at times intervened directly in currency markets, generally to depress the value of the yen, although it often refrains from doing so due to the political concerns of its major trading partners. The BOJ’s ultra-loose monetary policy in 2013–2024 resulted in the depreciation of the yen against other major currencies due to the growing policy divergence between the Bank of Japan and other major central banks. More recently, the gradual withdrawal from this ultra-loose policy has provided some support to the yen.
Over the past decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to widening policy divergences with other central banks, particularly the US Federal Reserve. This supported a widening spread between US and Japanese 10-year bonds, which supported the US dollar against the Japanese yen. The BoJ’s decision to phase out ultra-loose policy in 2024, combined with interest rate cuts at other major central banks, narrows the gap.
The Japanese yen is often viewed as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money into the Japanese currency due to its supposed reliability and stability. The turbulent times are likely to strengthen the value of the yen relative to other currencies considered riskier to invest in.
