The Japanese Yen (JPY) continues with its relative underperformance through the early European session on Friday as domestic political uncertainty and fiscal concerns overshadow hawkish Bank of Japan (BoJ) outlook. As was widely anticipated, the BoJ decided to leave short term rate on hold, while raising its growth and inflation forecasts for the fiscal year 2026. This, however, does little to impress bulls amid expectations for more ambitious fiscally expansionary policies under Prime Minister Sanae Takaichi.
Meanwhile, geopolitical risks eased significantly following US President Donald Trump’s U-turn on Greenland. This is seen as another factor undermining the JPY’s safe-haven status and contributes to the decline despite speculations that authorities could intervene to stem further weakness in the domestic currency. The US Dollar (USD), on the other hand, recovers slightly from the vicinity of a two-week low, retested the previous day, and further pushes the USD/JPY pair back closer to the 159.00 mark.
Japanese Yen selling bias remains unabated despite BoJ’s hawkish outlook
- As was widely expected, the Bank of Japan board members decided to maintain the short-term interest rate at 0.75%, following the conclusion of the two-day monetary policy review meeting on Friday.
- The central bank upgraded its growth outlook for fiscal 2025 and 2026, lifting median real GDP forecasts to 0.9% and 1.0% respectively, from 0.7% previously. The BoJ also revised its median core CPI forecast for fiscal 2026 to 1.9% from 1.8%, while the fiscal 2027 remained steady at 2.0%.
- Data released earlier today showed that Japan’s National Consumer Price Index fell from the 2.9% YoY rate to 2.1% in December, while CPI excluding fresh food arrived at 2.4% compared to the 3.0% in November.
- Additional details revealed that the National CPI excluding fresh food and energy slowed to the 2.9% YoY rate in December from 3.0% in the previous month, though it remains well above the BoJ’s 2% annual target.
- The data reaffirms market expectations of further BoJ policy tightening. Moreover, a private-sector survey showed that Japan’s manufacturing activity expanded in January for the first time in seven months.
- In fact, the S&P Global flash Japan manufacturing PMI rose to 51.5 in January, or its highest level since August 2024. Adding to this, the gauge for the service sector also picked up and rose to 52.8 from 51.1.
- Japan’s Prime Minister Sanae Takaichi will dissolve parliament on Friday ahead of a snap election on February 8, hoping for a stronger mandate to push through her ambitious fiscally expansionary policies.
- Investors, however, gave a thumbs down to Takaichi’s proposal to cut the 8% food consumption tax for two years, which led to the recent free fall in government bonds and continues to weigh on the JPY.
- Geopolitical tensions eased dramatically after US President Donald Trump announced on Wednesday a potential deal with NATO involving Greenland, further undermining the JPY’s safe-haven status.
- Meanwhile, hawkish BoJ expectations mark a significant divergence in comparison to the growing acceptance that the US Federal Reserve will lower borrowing costs at least two more times this year.
- Apart from this, the broader de-dollarization trend offsets Thursday’s upbeat US data and dragged the US Dollar back closer to a two-week low, which might further contribute to capping the USD/JPY pair.
USD/JPY bulls await breakout through ascending channel resistance, near 159.00
The 100-hour Simple Moving Average (SMA) edges higher at 158.16, and the USD/JPY pair holds above it, keeping the near-term tone bullish. The Moving Average Convergence Divergence (MACD) line sits marginally below the Signal line around the zero mark, with a small negative histogram that reinforces a cautious momentum backdrop. The Relative Strength Index (RSI) prints 56, slightly above the midline, suggesting steady buying interest. The ascending channel from 157.35 supports the uptrend, with resistance near 158.91. A decisive break could extend gains.
Price action respects the ascending structure, while the 100-period SMA continues to rise at 158.16 and acts as nearby support. The MACD remains below the Signal line and just under the zero level, while the negative histogram contracts, suggesting fading bearish pressure that could give way to renewed upside if momentum improves. RSI improves toward 56 from the mid-40s, aligning with stabilizing buying interest. Initial support stands near the lower channel boundary at 157.96. A failure to hold the channel floor would shift attention to downside risks.
(The technical analysis of this story was written with the help of an AI tool.)
Japanese Yen Price This week
The table below shows the percentage change of Japanese Yen (JPY) against listed major currencies this week. Japanese Yen was the strongest against the US Dollar.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -1.33% | -1.01% | 0.76% | -0.89% | -2.59% | -2.78% | -1.31% | |
| EUR | 1.33% | 0.32% | 2.09% | 0.44% | -1.28% | -1.47% | 0.01% | |
| GBP | 1.01% | -0.32% | 1.52% | 0.12% | -1.60% | -1.79% | -0.31% | |
| JPY | -0.76% | -2.09% | -1.52% | -1.61% | -3.29% | -3.48% | -2.03% | |
| CAD | 0.89% | -0.44% | -0.12% | 1.61% | -1.69% | -1.89% | -0.43% | |
| AUD | 2.59% | 1.28% | 1.60% | 3.29% | 1.69% | -0.19% | 1.30% | |
| NZD | 2.78% | 1.47% | 1.79% | 3.48% | 1.89% | 0.19% | 1.51% | |
| CHF | 1.31% | -0.01% | 0.31% | 2.03% | 0.43% | -1.30% | -1.51% |
The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Japanese Yen from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent JPY (base)/USD (quote).