USD/JPY plummeted by about one percent following today's statement by the head of the Bank of Japan.
The USD/JPY pair is usually calm at the beginning of the week. However, the statement by the Governor of the Bank of Japan (BoJ) triggered significant volatility. USD/JPY has become one of the most active major pairs, with a decline of about 1%, touching the daily low at 145.90. Its direction still appears downward when this news was written at the start of the New York session on September 11, although it has moderated slightly.
The Head of Bank of Japan (BoJ) Kazuo Ueda, told the Yomiuri newspaper that by the end of this year, BoJ may acquire enough data to determine whether they will end their negative interest rate policy. The interview immediately strengthened the Japanese yen's exchange rate in the forex market, causing USD/JPY to move away from the critical threshold of 150.00.
The market reaction has been relatively limited for the time being. This is because some analysts have doubts about this discourse. Some believe that Ueda is merely jawboning, a rhetorical approach to encourage the market to correct the Yen exchange rate without direct market intervention.
"It seems that Ueda's comments were intended to stop the yen's slide against the dollar," said Takehiko Masuzawa, trading head at Phillip Securities Japan.
He added, "His comments are almost the same as government intervention."
When the yen weakened significantly, surpassing the 145.00 threshold in September 2022, Japan injected trillions of yen to support its exchange rate. This currency intervention resulted in a short-term decline of 1-2% in USD/JPY.
Market participants will continue scrutinizing the prospects of changes in Japanese interest rates as we advance. The consensus from various projections can potentially influence the next USD/JPY trend. Additionally, the market is awaiting the release of US inflation data, which can significantly impact Wednesday.
Strong inflation data could stabilize the USD before the upcoming FOMC meeting on September 19-20. Conversely, any negative surprises could further weigh the US Dollar against other major currencies, particularly the Japanese Yen.