The Japanese Yen (JPY) continued its decline against the US Dollar (USD) after the Bank of Japan (BoJ) raised the short-term rate target by 15 basis points (bps) from 0%-0.1% to 0.15%-0.25%. This decision followed a two-day monetary policy review meeting, during which the BoJ also announced plans to taper Japanese government bond (JGB) purchases to ¥3 trillion per month starting in the first quarter of 2026.
At a press conference, BoJ Governor Kazuo Ueda explained that the policy adjustment aims to sustainably and stably achieve the 2% inflation target. He emphasized the necessity of reducing JGB purchases predictably while ensuring market stability through increased flexibility.
Meanwhile, the US Dollar faces challenges ahead of the Federal Reserve’s (Fed) interest rate decision on Wednesday. Although the Fed is expected to keep rates unchanged in July, speculation about a potential rate cut in September is putting pressure on the USD.
Daily Market Movements: Yen Weakens Ahead of BoJ Decision
Japan’s Chief Cabinet Secretary Yoshimasa Hayashi stated on Tuesday that the BoJ and the government would closely coordinate to implement appropriate monetary policies aimed at achieving the inflation target. This comes as Japan’s Retail Sales rose by 3.7% year-on-year in June, surpassing the forecasted 3.3% gain and marking the highest level in four months. On a monthly basis, Retail Sales increased by 0.6%, down from the previous 1.7% rise.
Japan’s Unemployment Rate fell to 2.5% in June, slightly better than market forecasts of 2.6% and the lowest since January.
Atsushi Mimura, Japan’s newly appointed Vice Finance Minister for International Affairs, expressed concern over the recent Yen depreciation in a Bloomberg interview, noting that its disadvantages are becoming more pronounced. Mimura mentioned that intervention could be considered to counter excessive speculation affecting the currency.
Japan’s top council has urged the government and the BoJ to consider the weak Yen’s impact on consumption when formulating policy. The council stressed that the adverse effects of a weak Yen and rising prices cannot be ignored.
Bank of America noted that strong economic growth in the United States allows the Federal Open Market Committee (FOMC) to wait before making any changes, anticipating the Fed will start cutting rates in December.
Technical Analysis: USD/JPY Trades Below 153.00
The USD/JPY pair is trading around 152.80 on Wednesday, testing the lower boundary of a descending channel. The 14-day Relative Strength Index (RSI) is slightly below 30, indicating an oversold condition and potential for a short-term rebound.
Immediate support is near the lower boundary of the descending channel at 152.60. A drop below this level could reinforce a bearish trend, possibly revisiting May’s low of 151.86, with additional support at the psychological level of 151.00.
On the upside, the pair faces resistance at the nine-day Exponential Moving Average (EMA) at 154.47, and further resistance at the upper boundary of the descending channel around 155.80.
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