Yen Nears 5-Month Low Amid BOJ Caution

27 Dec 2024 , 09:50 AM

As the U.S. Federal Reserve’s hawkish rhetoric clashed with the Bank of Japan’s cautious approach to more policy tightening, the yen stayed close to a five-month low against the dollar on Friday.

The yen was trading at 157.725 per dollar, up 0.1% from Thursday but still near the session’s low of 158.09 per dollar, which was the yen’s lowest since July 17.

The BOJ’s December policy meeting report, which was made public on Friday, revealed that while some officials were growing more optimistic about a rate hike in the near future, others remained cautious due to concerns about the direction of wages and the policies of the incoming Donald Trump government.

Tokyo’s December inflation data, which was also made public on Friday, supported additional rate increases.

Following the central bank’s decision to hold rates constant last week, BOJ Governor Kazuo Ueda stated that it would take “considerable time” to fully assess the outlooks for wages and foreign economies, especially the US.

In contrast, American central bank officials “are going to be cautious about further cuts” after a quarter-point rate decrease earlier this month, as Fed Chair Jerome Powell had previously stated.

Economists view Trump’s proposed tax cuts, tariff increases, stricter immigration, and looser regulations as both inflationary and pro-growth.

The dollar is expected to rise 5.4% vs the yen this month and 11.9% year-over-year.

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