empty
01.05.2025 11:31 AM
The Japanese Yen Has Declined Sharply — Here's Why

The yen fell sharply against the dollar and bond yields declined after the Bank of Japan (BoJ) left interest rates unchanged and pushed back the expected timeline for hitting its inflation target amid rising uncertainty due to U.S. tariffs. The Japanese currency dropped 0.5% to 143.79 after the BoJ held its benchmark rate steady at 0.5%. Meanwhile, the 10-year government bond yield fell 4.5 basis points to 1.265%, and the five-year sovereign yield slid 6 basis points to 0.82%.

This image is no longer relevant

The BoJ now expects inflation to align with its 2% target in the second half of the extended forecast period, which has been pushed out by a year to include fiscal 2027. The central bank also noted that price risks are skewed to the downside and emphasized the high level of uncertainty surrounding future trade policy.

The BoJ's decision to maintain its monetary policy sparked a mixed reaction among economists and analysts. On one hand, the policy stance is intended to support economic recovery, particularly amid global instability. On the other hand, the lack of further rate hikes undermines the yen's appeal as a safe-haven asset in the current climate, potentially leading to a more prolonged period of depreciation against the U.S. dollar.

Despite the optimistic inflation forecast, many experts doubt its feasibility given persistent global economic challenges and geopolitical tensions. In particular, unpredictable trade policies and potential supply chain disruptions could significantly impact prices and economic growth. The BoJ will need to monitor developments closely and be ready to adjust policy if necessary. Striking a balance between supporting the economy and controlling inflation is crucial for ensuring sustainable and balanced growth.

Futures market traders also adjusted their expectations for further tightening, with overnight index swaps now pricing in a 39% chance that the BoJ will raise rates by year-end.

"The BoJ's outlook report was more dovish than expected," said analysts at Mitsubishi UFJ Morgan Stanley Securities Co. "It likely signals an intention to wait for a clearer picture of the impact of U.S. tariffs before resuming rate hikes."

The yen had been strengthening against the dollar for four consecutive months, hitting its highest level since last September last week, as Trump's trade war spurred a sell-off in U.S. assets and boosted demand for safe havens. According to data from the Commodity Futures Trading Commission (CFTC), net long yen positions among speculative traders recently hit an all-time high.

Traders will continue to closely monitor any signals from BoJ Governor Kazuo Ueda regarding future rate hikes — especially amid ongoing geopolitical uncertainty and the yen's recent strength.

Jakub Novak,
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

Gold Rebounds as Fiscal Risks Resurface

Gold is swinging between extremes as spring draws to a close. The week ending May 16 was the worst for the precious metal due to optimism that, following a trade

Marek Petkovich 17:31 2025-05-23 UTC+2

AUD/JPY. Analysis and Forecast

Today, the AUD/JPY pair has started to attract buying interest, halting its pullback from the monthly high as demand for the Australian dollar emerges. Today's talks between U.S. Deputy Secretary

Irina Yanina 17:25 2025-05-23 UTC+2

USD/CAD. Analysis and Forecast

The pair is trending lower, dropping close to the key psychological level of 1.3800 amid broad-based U.S. dollar weakness. Traders have raised their expectations for Federal Reserve rate cuts following

Irina Yanina 16:43 2025-05-23 UTC+2

USD declares war on EUR

What's new is often just what's been forgotten. As spring draws to a close, the long-dismissed mantra "sell America" is making a comeback in markets. The phrase gained traction following

Marek Petkovich 14:59 2025-05-23 UTC+2

USD/JPY: what happens with yen?

The USD/JPY pair is experiencing heightened price turbulence. At the end of April, the pair sharply declined, hitting a 7-month low at 139.90. Then, last week, a northbound impulse pushed

Irina Manzenko 13:52 2025-05-23 UTC+2

Market Chaos to Continue (There is a likelihood of continued local declines in #USDX and gold prices)

Markets continue to act blindly amid the chaotic actions of Donald Trump, who is trying to pull the U.S. out of a deep, all-encompassing crisis like Baron Munchausen pulling himself

Pati Gani 10:19 2025-05-23 UTC+2

The Market Tucks Its Tail

A necessary project at the wrong time. The House of Representatives has approved Donald Trump's tax cut initiative. The President hopes it will help stimulate the economy and offset shortcomings

Marek Petkovich 09:29 2025-05-23 UTC+2

GBP/USD Overview – May 23: No Talks, but Hang in There

On Thursday, the GBP/USD currency pair traded relatively calmly, but like EUR/USD, it has been rising for two weeks. At first glance, one might wonder what reasons traders have

Paolo Greco 08:15 2025-05-23 UTC+2

EUR/USD Overview – May 23: The Rebellion Against the Dollar Continues

The EUR/USD currency pair traded relatively calmly on Thursday, yet it has risen significantly over the past two weeks. This movement can be interpreted in several ways. From a technical

Paolo Greco 08:15 2025-05-23 UTC+2

What to Pay Attention to on May 23? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Friday. Only two are noteworthy: the final estimate of Germany's Q1 GDP and April's UK retail sales data. The German GDP report

Paolo Greco 05:58 2025-05-23 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.