USD/JPY consolidates around 153.00 favoured by lower Fed easing bets

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The US Dollar (USD) has found footing in the lower range of the 152.00s against the Japanese Yen (JPY) and is consolidating around 153.00 on Thursday.

USD/JPY steadies around 153.00 after hitting two-week lows at 152.25.
A strong US Nonfarm Payrolls report provided some support for the US Dollar on Wednesday.
The Yen remains on track for a 2.6% weekly rally, boosted by Takaichi's victory at Sunday's elections.

The US Dollar (USD) has found footing in the lower range of the 152.00s against the Japanese Yen (JPY) and is consolidating around 153.00 on Thursday. Strong US employment figures have prompted investors to pare back bets on immediate rate cuts by the US Federal Reserve (Fed), providing some support to the Greenback, although upside attempts remain modest so far.

The delayed US Nonfarm Payrolls report, released on Wednesday, showed that job creation accelerated to 130K, beating expectations of 70K, and the unemployment rate fell to 4.3% from 4.4% in December.

Investors’ optimism, however, was offset by the strong concentration of January’s jobs, with the healthcare sector accounting for more than 80K and the downward revision of 2025 data to 181,000 net jobs from previous estimations of 584,000.

The Yen remains on track to a strong weekly performance

The Yen is showing the strongest performance among the G8 majors this week, on track for its best week in more than a year. Markets are welcoming Prime Minister Takaichi’s landslide victory in Sunday’s elections amid the prospects of a stable government, and have shrugged off doubts about her fiscal largesse.

Investors are focusing on the positive economic effects of Takaichi’s large stimulus programs and tax cuts, playing down earlier concerns about the challenges of financing those measures without increasing already high public debt.

Takaichi’s stimulus measures, coupled with a weak Japanese Yen, are expected to boost consumer demand and boost inflation, forcing the Bank of Japan (BoJ) to hike interest rates further. Markets have ramped up bets of a near-term rate hike, which might take place as soon as March, and one or two more hikes throughout the year. With the Fed still in its easing cycle, this is likely to act as a headwind for the pair.

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.