The Yen experienced broad-based weakness following the Bank of Japan’s (BOJ) decision to hold steady its ultra-loose monetary policy. This contrasted sharply with the actions of other major central banks, such as the Federal Reserve and the European Central Bank, which are actively raising interest rates to curb rising inflation.
The BOJ’s commitment to its yield curve control policy, which aims to keep long-term interest rates near zero, has further widened the interest rate differential between Japan and other economies. This differential makes Yen-denominated assets less attractive to investors, leading to increased selling pressure on the currency.
Analysts suggest that the Yen’s weakness could persist as long as the BOJ maintains its dovish stance. However, any signs of a potential shift in policy, such as a change in inflation forecasts or a modification of the yield curve control policy, could trigger a significant rebound in the Yen.
Key factors to watch include:
- Upcoming inflation data from Japan
- Speeches and statements from BOJ officials
- Global economic developments
The currency market will be closely monitoring these developments for clues about the future direction of the Yen.
