empty
21.03.2025 12:46 AM
The Outlook for the Japanese Yen Remains Confidently Bullish

The Bank of Japan (BoJ) kept interest rates unchanged on Wednesday, and the market reacted neutrally, as this outcome was widely expected. BoJ Governor Kazuo Ueda stated that the risk of rising core inflation remains as wage growth and food prices remain elevated. Inflation data for February will be released overnight, and so far, the trend clearly favors further increases.

This image is no longer relevant

This marks the third consecutive BoJ meeting in which the interest rate has remained unchanged. In January, expectations were that the BoJ would raise rates in March, but the new U.S. president's announcement of a tariff review on imports increased uncertainty, leading to another pause—an outcome that was largely anticipated.

Japan is closely monitoring U.S. trade policy changes, with an expected announcement on April 2 regarding tariff increases on automobiles. The United States is Japan's largest export market (over $140 billion), with automobiles accounting for 28% of total exports. Japan fears it may become the next target of trade restrictions, as surveys indicate that business sentiment among manufacturers deteriorated in March.

Domestic wage growth is the second key factor influencing the BoJ's position, as it plays a crucial role in consumer demand and inflation. On Friday, the Japanese Trade Union Confederation (Rengo) announced that it had secured an average wage increase of 5.46%, exceeding last year's figures and marking the largest gain in 30 years. If these numbers are confirmed, expectations for a BoJ rate hike in May will strengthen, further boosting the yen. Current forecasts suggest that the BoJ will raise rates to 0.75% at one of its upcoming meetings, most likely in July, but now the market is increasingly considering the possibility of an earlier hike. Since the Federal Reserve is cutting rates, the trajectory for USD/JPY is quite clear.

Net long positions on the yen have reached $11.3 billion, the strongest speculative bet against the U.S. dollar among G10 currencies. Despite minimal changes in positioning over the past week, bullish momentum for the yen remains strong, and the estimated fair value of USD/JPY continues to decline.

This image is no longer relevant

After forming a local low at 146.50, USD/JPY rebounded slightly but remained within a bearish channel, with little reason to expect sustained growth. There was some speculation that the Bank of Canada might opt for another rate hike, but this did not materialize, and it has not changed the overall market sentiment—the yen is expected to continue strengthening.

Currently, the BoJ is the only major central bank tightening monetary policy, while others are shifting toward easing. We see a high probability of USD/JPY breaking below 146.50 and moving toward the long-term target of 139.59. The only potential disruption to this scenario would be a sharp increase in U.S. inflation expectations, which could alter the FOMC's rate outlook—but for now, there are no signs of such a shift.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

USD/JPY. Analysis and Forecast

The bulls of the Japanese yen have not been significantly affected by the disappointing GDP report for Japan's first quarter. This is largely due to growing expectations that the Bank

Irina Yanina 18:38 2025-05-16 UTC+2

XAU/USD. Analysis and Forecast

Gold is experiencing renewed intraday pressure, falling below the key psychological level of $3200 during the first half of the European session on Friday. Optimism surrounding the trade truce between

Irina Yanina 18:37 2025-05-16 UTC+2

Market gets lost in crowd

Investors are so confident that Donald Trump is following the stock market's lead that the S&P 500 no longer needs a reason to rise. The broad equity index had been

Marek Petkovich 11:40 2025-05-16 UTC+2

Japan on the Brink of Recession

The GDP report published on Thursday revealed that Japan's economy contracted by 0.7% year-over-year in the first quarter—its first annual decline in the past year and significantly worse than expected

Kuvat Raharjo 11:00 2025-05-16 UTC+2

Investors Continue Digesting the Impact of the Tariff Truce Between the U.S. and China (There Is a Chance of Renewed Corrective Decline in Gold and Oil Prices)

Markets have fully priced in the outcome of the U.S.–China talks, which resulted in a 90-day trade truce. Weaker-than-expected U.S. economic data offset the early-week optimism. The recent rally lost

Pati Gani 10:49 2025-05-16 UTC+2

What to Pay Attention to on May 16? A Breakdown of Fundamental Events for Beginners

Few macroeconomic events are scheduled for Friday, and they are not more significant than the reports released on Thursday, which did not provoke any market reaction. In essence, the only

Paolo Greco 06:17 2025-05-16 UTC+2

GBP/USD Overview – May 16: The Market Has No Desire to Sell

The GBP/USD currency pair traded sideways on Thursday with low volatility—typical behavior for the pound over the past month. First, there was a classic flat range; now, we see "swings"

Paolo Greco 03:54 2025-05-16 UTC+2

EUR/USD Overview – May 16: The Dollar Remains the World's "Number One Currency"

The EUR/USD currency pair moved in both directions on Thursday but ultimately remained below the moving average line. Its position beneath the moving average allows us to expect further strengthening

Paolo Greco 03:54 2025-05-16 UTC+2

Are Things Really So Optimistic with the Deals with China and the UK?

Last week, Donald Trump announced the signing of the first deal with the United Kingdom under his "America's Liberation" campaign. It was later revealed that the deal had not been

Chin Zhao 00:40 2025-05-16 UTC+2

The Euro Didn't End Up in the Junkyard

Chinese goods have flooded the European market, but EUR/USD bulls aren't alarmed by this. While the U.S. has reduced tariffs on imports from China, the weighted average tariff still sits

Marek Petkovich 00:39 2025-05-16 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.