USD/JPY: Japanese Yen Drops Ahead of BoJ’s Key Interest Rate Decision

01/23/2025

1 minute read

2025.01.23 07:25

The Japanese yen is slightly lower on Thursday. In the European session, is trading at 156.25, down 0.16% on the day.

BoJ Expected to Hike Rates

All eyes are on the Bank of Japan, which meets early on Friday. The BoJ is expected to raise by 25 basis points which would bring the cash rate to 0.50%. The BoJ has said that it will raise rates if it sees higher , which would indicate that inflation is sustainable. BoJ policymakers have expressed confidence that wages are moving higher and Deputy Governor Himino said last week that many firms plan to raise wages at least as much as last year.

Investors will be keeping a close eye on the BoJ’s rate statement. The tone of the statement could be dovish as BoJ policymakers are concerned about President Donald Trump’s threats to levy trade tariffs as early as Feb. 1, a move which could destabilize the financial markets. The BoJ will have to be cautious as it gauges the ‘Trump factor”.

Another factor supporting a rate hike is the poor performance of the Japanese yen, which has declined around 9% in the past three months. The is sounding more hawkish and might raise rates only once or twice this year. If the BoJ stays on the sidelines again, the yen could fall further.

Overshadowed by the BoJ meeting, Japan releases December . Japan’s core inflation rate has been climbing higher and is expected to climb to 3% y/y, up from 2.7% in November which was a three-month high. The core rate, which is closely watched by the BOJ, has hovered above the central bank’s target of 2% for over two years. USD/JPY-4-Hour Chart