Yen Steadies Below $157

The Japanese yen strengthened toward 157 per dollar on Friday, extending gains for a third consecutive session after the Bank of Japan kept its policy rate at 1.25%, in line with market expectations. The central bank signaled that underlying inflation has finally reached its 2% target, potentially paving the way for a rate hike in December. The decision was reached by an 8-1 vote, with board member Hajime Taka dissenting in favor of raising rates to 1.5%, arguing that conditions have entered a new phase that warrants a faster move toward a neutral interest rate. Meanwhile, the yen received additional support from safe-haven demand as disappointing earnings from major technology companies revived concerns over AI-related investments and triggered another equity selloff. Furthermore, global asset managers have begun returning to Japan’s bond market as improving domestic demand and a more favorable monetary policy outlook increase the attractiveness of relatively higher yields.

The Japanese yen steadied around 157.7 per dollar on Thursday after coming under pressure earlier in the week, as investors awaited the Bank of Japan’s upcoming policy announcement. The central bank is widely expected to keep interest rates unchanged, although policymakers could signal a potential rate hike in December amid persistent inflationary pressures. Investors are also monitoring upcoming Japanese economic data, including unemployment, industrial production, retail sales, and Tokyo’s inflation figures, which are due ahead of the BOJ decision. Meanwhile, the US Federal Reserve maintained interest rates as widely anticipated, though two officials dissented in favor of a 25-basis-point increase, strengthening market expectations for a possible rate hike in December. Elsewhere, the yen received renewed safe-haven support as disappointing earnings from Alphabet and Samsung revived concerns over the sustainability of AI-related investments.

The Japanese yen weakened toward 158 per dollar on Wednesday, erasing most of last week’s safe-haven gains amid renewed optimism surrounding artificial intelligence. South Korean chipmaker SK Hynix reported strong third-quarter results and announced increased shareholder returns backed by AI-driven profits, further strengthening the sector’s outlook. Meanwhile, investors are preparing for the Bank of Japan’s policy meeting this week, where interest rates are widely expected to remain unchanged, although policymakers may signal a potential rate hike in December amid persistent inflationary pressures. Recent data showed that a key measure of Japan’s services-sector inflation rose 3.7% year over year in September, its highest level since June 2024, as labor, transportation, and fuel costs remained elevated. Investors are also monitoring monetary policy decisions from other major central banks this week, which could influence the yen’s direction.