• The Yen loses ground as the Japanese government slashes economic growth expectations for 2025.
• Japanese officials affirmed that the BoJ might be behind the curve with interest rates.
• The USD/JPY remains trading back and forth between 146.60 and 148.00.

The US Dollar is reversing previous lows against the Japanese Yen, as safe assets suffer on Thursday, amid a moderate appetite for risk. In Japan, the Government’s downgrade of its GDP forecasts has offset Japanese officials’ calls for higher rates.

The Japanese Cabinet Office cut its Gross Domestic Product growth expectations for 2025 to 0.7% from the 1.2% forecast released in January, as, according to the latest report, Trump’s tariffs will reduce exports to the United States and weigh on the global economy.

The Bank of Japan, behind the curve

The report has offset comments from a private sector member of the government’s top economic council, warning that the Bank of Japan might be too late with rate hikes, as the CPI is above the 2% target, already affecting people’s lives and their inflation expectations. 

Another private sector member affirmed that while in the past the target was accelerating price growth to 2%, the focus now should be on keeping it steady at that level.

These comments highlight the increasing concerns about the economic impact of steady price increases and add pressure on the central bank to continue tightening its monetary policy.

The positive impact on the Yen, however, was marginal. The US Dollar extends its recovery from session lows at 146.70, reaching levels close to 147.40 so far. The pair, however, remains trapped within the weekly range, below 148.00, consolidating losses after dropping more than 2% last f¡Friday, following a weak US NFP release.