USDJPY has been soaring recently, with the greenback at 24-year highs against the Japanese currency.
Friday saw a small retracement in the pair and the Yen will look to Tuesday’s CPI report for the US economy to add further gains.
USDJPY-Daily Chart
The inflation rate for the US economy is expected to slip to 8.0% from 8.5%, and that could lead to traders selling off the greenback on peak inflation hopes. That could slow the trajectory of Federal Reserve interest rate hikes and could take some of the recent steam out of the US dollar.
Another potential mover for the Yen could be statements from Japanese officials hinting at currency intervention. The latest comments came from Seiji Kihara, deputy chief cabinet secretary of Prime Minister Fumio Kishida’s government.
Kihara also remarked that the government would consider “in the not-so-distant future” relaxing strict border controls to open Japan’s borders to overseas visitors.
“As for excessive, one-sided currency moves, we will closely watch developments and must take steps as needed,” Kihara said when asked about the Yen’s recent moves.
“I won’t comment on monetary and interest-rate policy, as they fall under the jurisdiction of the BOJ,” he added.
The government is looking to scrap a cap on visitor numbers to Japan by October, according to the Nikkei newspaper. A weak yen is most effective in attracting inbound tourism, Kihara said, before adding that more must be done to attract tourists.
The Yen has been hammered by the BOJ’s support for the weak economy with ultra-low interest rates. The Federal Reserve has been aggressive in raising rates and that interest rate differential is a key factor in the Yen’s decline.
According to MOF sources speaking to Yahoo Finance, the BOJ still has no plans to raise interest rates or alter its dovish policy guidance to support the yen.
