The Japanese Yen (JPY) has seen a slight increase following the release of encouraging trade balance data from Japan, but it remains near a one-week low against the US Dollar (USD). Recent trade statistics revealed a surplus of ¥130.9 billion for December, contrasting with forecasts anticipating a deficit. Despite this positive development, the year-on-year export growth rate of 2.8% indicates a deceleration compared to the previous month’s 3.8% increase, while imports also missed expectations with a modest rise of 1.8%.
Market participants are cautious ahead of the Bank of Japan’s (BoJ) policy meeting, where a potential interest rate hike from 0.25% to 0.50% is anticipated. This would mark the first increase since the global financial crisis in 2008. With over a 90% probability assigned to this outcome, the dynamics contrast sharply with expectations for multiple rate cuts by the Federal Reserve later this year, as inflation pressures in the US appear to be easing.
Concerns surrounding US President Trump’s tariff strategies and an overarching risk-on sentiment in the market are tempering any significant appreciation of the Yen. Traders are particularly interested in upcoming comments from Trump at the World Economic Forum, which may provide fresh market insights. Meanwhile, the ongoing spring wage negotiations in Japan stress the importance of broad wage increases, seen as a key factor for the BoJ to consider monetary tightening.
From a technical standpoint, the USD/JPY pair appears to have found support above the 156.00 level. A move past the 156.30 – 156.35 range could encourage bullish sentiment, aiming for potential targets near 156.75 – 156.80 and the 157.00 round figure. Conversely, a breach beneath the 156.25 area may lead to a quick drop towards the 155.50 level, with any further decline opening the door to levels around 154.00. As the BoJ’s decision approaches, market participants remain attentive to both domestic and international economic indicators.
