Japan’s Prime Minister has indicated a commitment to ongoing investment and job creation in the United States. The prime minister emphasized the importance of urging the US to ensure a stable energy supply as a key aspect of this collaborative approach.
Currently, the USD/JPY currency pair is experiencing a slight decline, trading at 154.08, reflecting a 0.11% decrease for the day. The Japanese Yen is widely recognized as one of the most traded currencies globally, with its value significantly influenced by the overall performance of the Japanese economy. Specific factors, including the policies set by the Bank of Japan, differences in bond yields between Japan and the United States, and the prevailing risk sentiment among investors, play critical roles in determining the Yen’s exchange rate.
The Bank of Japan’s mandate includes controlling the currency, making its actions crucial for the Yen’s strength. In the past, the central bank has intervened in the currency markets, typically to lower the Yen’s value, although such interventions are infrequent due to potential political ramifications with major trading partners. The BoJ’s extended period of ultra-loose monetary policy from 2013 to 2024 resulted in a depreciation of the Yen against other major currencies, mainly because of a growing divergence in monetary policy between the Bank of Japan and other leading central banks. More recently, a shift away from this ultra-loose approach has begun to bolster the Yen’s value.
Over the last decade, the persistent application of ultra-loose monetary policy by the Bank of Japan has widened the policy gap compared to other central banks, particularly the US Federal Reserve. This has contributed to a broader gap between the 10-year US and Japanese bond yields, generally benefiting the US Dollar. However, the BoJ’s recent decisions to gradually move away from this policy, alongside interest rate reductions by other major central banks, are beginning to close this gap.
Traditionally viewed as a safe-haven asset, the Japanese Yen tends to strengthen during periods of market turmoil, as investors are drawn to its perceived reliability and stability compared to riskier currencies.
