Today’s markets analysis on behalf of Joseph Dahrieh, Managing Principal at Tickmill
The Japanese yen remains steady, hovering near five-month highs following comments from Bank of Japan (BoJ) Deputy Governor Shinichi Uchida, who hinted at potential rate hikes if economic conditions align. He pointed to rising wages as a key factor for inflation. Hawkish comments could support the yen and Japanese yields.
However, external pressures, such as U.S. tariffs on Canada, Mexico, and China, weighed on the yen. Markets are pricing in a rate hike to 0.75% by July and 1% next year, but Uchida warned against precise predictions due to challenges in estimating Japan’s neutral interest rate. This uncertainty suggests the yen could remain volatile, influenced by global risks, while bond yields may face upward pressure as the BoJ moves away from its ultra-loose policy.
Meanwhile, Japanese Finance Minister Katsunobu Kato denied currency manipulation claims, stressing Japan’s commitment to market stability. Traders could turn to new economic data releases in Japan and the US to gauge the currency pair’s direction in addition to monitoring developments in US trade policies and their impact on the Japanese economy.