Tokyo's warning keeps yen stalled at 160.00 ahead of Japan's growth data

USD/JPY loses momentum after reaching 160.00 for the first time since early September.
With US 10-year yields above 5%, Tokyo warns that the Yen is moving too quickly.
Friday brings US producer price data, followed by Japan's growth figures on Sunday.

USD/JPY struggled to hold above 160.00 on Thursday, returning to almost its opening level after briefly crossing the threshold. It was the pair's first visit since early September to a level at which Japan has bought Yen twice this year. The session peak was marginally above 160.00, while the pair is now trading just below it. The most recent sizeable move remains Wednesday's breakout from its range.

TMGM Analysis: Financial Market News, Economic Calendar & Market Insights

Warning that recent currency moves had been too swift, Japan's Vice Finance Minister for International Affairs Mimura said on Thursday that the summer intervention should not be forgotten. A record JPY 15.4 trillion was spent by Japan between 30 July and 3 August. Separately, the New York Fed confirmed on Thursday that the US Treasury had purchased Yen during the third quarter. The intervention drove the pair down from around 164.00 to around 155.00; it has since returned to within about four Yen of its starting point.

Despite broad Dollar gains against the Euro, the Pound and the Kiwi, USD/JPY remained unchanged. Markets have fully priced in a Fed rate hike on 9 December, while weak demand at a 30-year auction pushed the 10-year Treasury yield to around 5.12% on Thursday. The Bank of Japan (BoJ) rate stands at 1.25%, compared with the Fed's 3.75%-4.00%.

Which Upcoming Releases Could Shape the Outlook?

A speech by New York Fed President Williams is scheduled for 23:30 GMT on Thursday. Attention then turns to Friday's US producer price data at 13:30 GMT. A monthly increase of 0.4% is forecast, following 1.3%, with the release bearing on the size of the Fed's December rate hike.

Due at 23:50 GMT on Sunday, Japan's preliminary third-quarter Gross Domestic Product (GDP) is forecast to rise 0.1% quarter on quarter, following 0.4%. At 04:00 GMT on Monday, BoJ board member Takata will speak, having voted for a rate hike on 30 October. October national inflation data will follow at 23:30 GMT on Thursday, 19 November. These three events precede the BoJ's 18 December decision, at which a rate hike is widely anticipated.

What Does the Chart Signal After the Breakout?

Following Wednesday's advance beyond the 157.00-159.00 range that had contained trading since late September, the pair has retraced roughly three-fifths of its decline from the late-July peak to the September trough near 153.00. Thursday's trading bar is narrow: the low sits just below 159.50, and the latest price is almost unchanged from the opening price.

USD/JPY: daily price chart

Japanese Yen: Frequently Asked Questions

Which factors are the main drivers of the Japanese Yen?

Among the most actively traded currencies globally, the Japanese Yen (JPY) takes its broad direction from Japan's economic performance. More specific influences include the Bank of Japan's policy decisions, the gap between Japanese and US bond yields, and traders' appetite for risk, alongside other factors.

Why do Bank of Japan decisions matter for the Japanese Yen?

Currency control is part of the Bank of Japan's mandate, making its actions an important influence on the Yen. Direct intervention in currency markets has occasionally been undertaken by the BoJ, usually to weaken the Yen. However, political concerns among Japan's principal trading partners discourage frequent intervention. Between 2013 and 2024, the BoJ's ultra-loose monetary policy weakened the Yen against other major currencies as the policy gap between the Bank of Japan and other leading central banks widened. More recently, a gradual withdrawal from that ultra-loose stance has provided the Yen with some support.

Why does the gap between Japanese and US bond yields affect the Japanese Yen?

By maintaining ultra-loose monetary policy over the past decade, the BoJ increasingly diverged from other central banks, especially the US Federal Reserve. That divergence helped widen the yield gap between 10-year US and Japanese bonds, supporting the US Dollar relative to the Japanese Yen. The gap is now narrowing as the BoJ implements its 2024 decision to gradually exit ultra-loose policy, while other major central banks cut interest rates.

Why does the Japanese Yen respond to broader risk sentiment?

Investors often regard the Japanese Yen as a safe-haven asset. When markets come under stress, its perceived reliability and stability make investors more likely to move funds into the Japanese currency. As a result, periods of turbulence are likely to lift the Yen against currencies considered riskier investments.