Yen Edges Up Ahead of BOJ Policy Meeting

The Japanese yen strengthened slightly beyond 158 per dollar on Thursday but remained within a tight trading range as investors awaited next week’s Bank of Japan policy meeting. The central bank is widely expected to keep interest rates unchanged before potentially raising them in December amid persistent inflationary pressures. On Wednesday, BOJ Deputy Governor Ryozo Himino noted that underlying inflation was approaching the bank’s 2% target and cautioned against delaying policy adjustments, reinforcing hawkish remarks made by Governor Kazuo Ueda earlier this week. However, the yen continued to face pressure from carry trades, as Japan’s relatively low interest rates reduced the currency’s attractiveness. The BOJ’s gradual pace of monetary tightening is also seen as insufficient to significantly narrow the interest rate differential between Japan and other major economies.

The Japanese yen was little changed around 158.2 per dollar on Wednesday, remaining within a narrow range as investors assessed data showing that exports increased less than expected in September and posted the slowest growth since April. Still, exports extended their growth streak to 13 consecutive months, supported by strong demand for semiconductors and AI-related products. On the monetary policy front, the Bank of Japan is widely expected to leave interest rates unchanged next week before implementing a rate hike in December. Earlier this week, Governor Kazuo Ueda noted that underlying inflation was nearing the central bank’s 2% target, reinforcing expectations of a more hawkish policy stance. However, the yen remained under pressure from persistent carry trades, as Japan’s relatively low interest rates continued to weigh on its appeal. The BOJ’s gradual approach to monetary tightening is also viewed as insufficient to close the interest rate gap with other major economies.

The Japanese yen hovered around 158.5 per dollar on Tuesday after declining in the previous session, struggling to recover despite hawkish remarks from the Bank of Japan’s leadership. Governor Kazuo Ueda indicated that underlying inflation was approaching the central bank’s 2% target, supported by a moderate economic recovery and tight labor market conditions. He also highlighted supply-side price pressures stemming from higher Middle Eastern energy costs, alongside demand-driven inflation fueled by strong AI-related demand. However, the yen remained under pressure from persistent carry trades, as Japan’s relatively low interest rates continued to make the currency less attractive. The BOJ’s gradual pace of monetary tightening is also seen as insufficient to match rate levels in other major economies.