Yen Weakens Against Dollar as BoJ Keeps Yield Control Policy

The Japanese yen faced a setback against the robust US dollar on Friday following the release of a report suggesting that the Bank of Japan (BoJ) is likely to hold its key yield control policy steady in the upcoming week. The decision comes amid a flurry of central bank meetings involving major economies like the United States and Europe.

In an attempt to ensure the nation’s wages and inflation continue to rise steadily, BoJ policymakers are leaning towards adopting a cautious approach by thoroughly scrutinizing relevant data before making any significant changes to their existing policy. According to the report by Reuters, there is currently no consensus within the central bank, making the final decision a closely contested one.

Speculations Surrounding Inflation Targets

The market has been buzzing with speculation about potential adjustments to the BoJ’s yield curve control policy, fueled by inflation surpassing the central bank’s target for over a year now. The upcoming July 27-28 meeting is being closely watched by investors and analysts alike for any hints on policy adjustments.

Earlier on Friday, data revealed that Japan’s core inflation rose to 3.3%, aligning with the median market forecast and remaining ahead of the BoJ’s targeted 2% mark. This rise in inflation has added to the complexity of the central bank’s decision-making process as they navigate the delicate balance between economic growth and monetary policy.

source: tradingeconomics.com

Impact on the Yen

In response to the report’s findings, the US dollar saw an impressive 1.24% surge against the yen, reaching 141.81 yen, the highest level since July 10. The dollar’s strength has been building; it is currently trading slightly below the peak of 145.07 yen reached on June 30, a high not seen since November 10. This remarkable weekly percentage gain of 2.22% positions the greenback as a dominant force in the currency markets.

To address the prevailing currency market volatility, Japanese authorities, led by the country’s top currency diplomat, Masato Kanda, have reaffirmed their commitment to exploring all available options. They aim to tackle excess volatility in the currency market effectively and ensure stability in the financial system.