Yen gains following BoJ minutes as Ueda and US NFP take focus on Friday

USD/JPY has slipped below 158.00 again, returning to levels seen before Tuesday's surge towards 159.00.
December rate-hike expectations strengthened after the BoJ minutes, while US technology shares declined.
Friday's agenda includes US payrolls data and an address by BoJ Governor Ueda.

The Yen is strengthening against the Dollar on Thursday, even as the US currency advances against the Pound, the Euro, the Kiwi and the Aussie. Support came from Bank of Japan (BoJ) minutes that appeared to make the case for a December rate hike, alongside a decline in US technology shares. From Tuesday's peak just below 159.00, the highest since mid-October, USD/JPY has retreated to slightly above 157.50.

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

At its October 30 meeting, the BoJ voted eight to one to keep rates at 1.25%; board member Takata favoured 1.5%. Its next meeting is on December 17-18. That division was highlighted in Thursday's minutes, with Japanese rates remaining two and a half percentage points or more below the Fed's 3.75%-4.00%. If the Fed leaves rates unchanged, a December BoJ hike would narrow the differential by a quarter-point.

Market pricing for the Fed's December 9 decision stands near 70%. Cleveland Fed President Hammack, who backed a hike on October 28, said on Thursday that policy needs to become restrictive. Were Washington to raise rates on December 9 and Tokyo to follow on December 18, the differential would remain unchanged. Thursday's decline in US technology shares also contributed to the Yen's gains.

Which Upcoming Releases Could Shape Rate Decisions?

Japan's September labour cash earnings, due at 23:30 GMT on Thursday, are expected to rise 3.8% year on year, matching August's increase. A speech by BoJ Governor Ueda follows at 16:00 GMT on Friday. Both will inform the BoJ's December 17-18 meeting, its final policy decision of the year.

An increase of 65K is forecast for October Nonfarm Payrolls (NFP), following September's 29K gain, with the report due on Friday at 13:30 GMT. Earlier that day, New York Fed President Williams speaks at 09:30 GMT. The October Consumer Price Index (CPI), scheduled for Tuesday, November 10, at 13:30 GMT, is expected to rise 0.3% after 0.6%. That release will feed into the Fed's December 8-9 meeting.

What Do the USD/JPY Charts Indicate?

Following the latest reversal from just below 159.00 at Tuesday's peak, USD/JPY has returned to the 156.00-159.00 band that has contained trading since late September. The pair now trades slightly below both the 50-day Exponential Moving Average (EMA) and the 200-day EMA, each of which lies within a quarter-Yen of 158.00.

USD/JPY: Daily Chart

Japanese Yen: Common Questions

Which Factors Are Most Important for the Japanese Yen?

Among the world's most actively traded currencies, the Japanese Yen (JPY) takes its broad direction from Japan's economic performance. More specific influences include Bank of Japan policy, 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 Yen?

Currency control forms part of the Bank of Japan's mandate, making its actions an important influence on the Yen. At times, the BoJ has intervened directly in currency markets, usually to weaken the Yen. Political concerns among Japan's main trading partners, however, discourage frequent intervention. Between 2013 and 2024, the BoJ's ultra-loose monetary stance weakened the Yen against its major currency peers as policy increasingly diverged from that of other leading central banks. More recently, a gradual withdrawal of this ultra-loose stance has provided the Yen with some support.

Why Does the Japan-US Bond Yield Gap Matter for the Yen?

By maintaining ultra-loose monetary policy over the past decade, the BoJ moved further apart from other central banks, especially the US Federal Reserve. This divergence helped widen the yield gap between 10-year US and Japanese bonds, supporting the US Dollar against the Japanese Yen. The differential is now narrowing as the BoJ gradually moves away from ultra-loose policy following its 2024 decision, while other major central banks cut interest rates.

How Does Market Risk Appetite Influence the Japanese Yen?

Often regarded as a safe-haven investment, the Japanese Yen tends to attract investors' funds during periods of market stress because of its perceived reliability and stability. During such turbulence, the Yen is likely to appreciate against currencies viewed as riskier investments.