USD/JPY rises above 148.50 ahead of BoJ Meeting Minutes

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The USD/JPY pair rises to near 148.80 during the early Asian session on Thursday. The US Dollar (USD) strengthens to near its highest in three weeks against the Japanese Yen (JPY) due to a fresh round of risk aversion across the financial markets and a cautious tone from the US central bank.

USD/JPY gathers strength around 148.80 in Thursday’s early Asian session.
Fed Powell's cautious rate outlook boosts the US Dollar.
BoJ Meeting Minutes and the final reading of the US Q2 GDP report will be the highlights later on Thursday.

Federal Reserve (Fed) Chair Jerome Powell struck a cautious tone on further easing on Tuesday, supporting the Greenback. Powell said that the Fed needs to continue balancing the competing risks of high inflation and a weakening job market in its upcoming rate decisions. He added that the interest rates are in a good place to deal with either threat, suggesting he sees no urgency to lower rates aggressively.

Financial markets anticipate quarter-point rate cuts at the remaining two Fed meetings this year and another in the first quarter of 2026, in line with the Fed's guidance after last week's meeting.

The S&P Global flash Japan Manufacturing Purchasing Managers' Index (PMI) fell at the fastest pace in six months in September, which dragged the JPY lower. Additionally, concerns over political uncertainty in Japan ahead of the Liberal Democratic Party (LDP) leadership election scheduled for October 4 could prompt the Bank of Japan (BoJ) to delay raising interest rates. This, in turn, might contribute to the JPY’s downside.

Traders will keep an eye on the Bank of Japan (BoJ) Meeting Minutes and the final reading of US Gross Domestic Product (GDP) for the second quarter (Q2), which is due later on Thursday. Any signs of weakness in the US economy could undermine the USD against the JPY in the near term.

Japanese Yen FAQs

What key factors drive the Japanese Yen?

The Japanese Yen (JPY) is one of the world’s most traded currencies. Its value is broadly determined by the performance of the Japanese economy, but more specifically by the Bank of Japan’s policy, the differential between Japanese and US bond yields, or risk sentiment among traders, among other factors.

How do the decisions of the Bank of Japan impact the Japanese Yen?

One of the Bank of Japan’s mandates is currency control, so its moves are key for the Yen. The BoJ has directly intervened in currency markets sometimes, generally to lower the value of the Yen, although it refrains from doing it often due to political concerns of its main trading partners. The BoJ ultra-loose monetary policy between 2013 and 2024 caused the Yen to depreciate against its main currency peers due to an increasing policy divergence between the Bank of Japan and other main central banks. More recently, the gradually unwinding of this ultra-loose policy has given some support to the Yen.

How does the differential between Japanese and US bond yields impact the Japanese Yen?

Over the last decade, the BoJ’s stance of sticking to ultra-loose monetary policy has led to a widening policy divergence with other central banks, particularly with the US Federal Reserve. This supported a widening of the differential between the 10-year US and Japanese bonds, which favored the US Dollar against the Japanese Yen. The BoJ decision in 2024 to gradually abandon the ultra-loose policy, coupled with interest-rate cuts in other major central banks, is narrowing this differential.

How does broader risk sentiment impact the Japanese Yen?

The Japanese Yen is often seen as a safe-haven investment. This means that in times of market stress, investors are more likely to put their money in the Japanese currency due to its supposed reliability and stability. Turbulent times are likely to strengthen the Yen’s value against other currencies seen as more risky to invest in.