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Source: Newsmaker.id
The Japanese yen weakened sharply during Friday's trading (Sept. 18), hitting its lowest level since early September after the Bank of Japan's (BoJ) interest rate decision was perceived as failing to signal sufficiently aggressive tightening. The USD/JPY pair traded around 157.14—up approximately 0.8%—reflecting selling pressure on the yen as investors engaged in profit-taking following the BoJ's announcement.
The BoJ raised interest rates by 25 basis points to 1.25%—a 31-year high—in a 7-2 vote. However, the move actually triggered a weakening of the yen because the market perceived a divergence of views within the central bank. Two board members voted to keep rates unchanged, dampening expectations for rapid, successive hikes.
Comments from BoJ Governor Kazuo Ueda also drew market attention. Ueda emphasized that the central bank is still weighing various options for future policy, which will depend on inflation trends and economic conditions. However, he also stressed that the BoJ would not pursue aggressive tightening that could place significant strain on Japan's economic growth.
Recent economic data also limited support for the yen. Japan's core inflation rose 1.7% year-on-year in August, slightly below the market expectation of 1.8%. This figure led the market to conclude that there is currently insufficient inflationary pressure to prompt the BoJ to accelerate the pace of rate hikes.
Meanwhile, the US dollar continued to find support from the Federal Reserve's hawkish stance. The US Dollar Index held steady around the 100.23 level after the Fed raised rates by 25 basis points to the 3.75%–4.00% range and signaled that further hikes remain on the table. Market expectations for continued rate increases also rose, driven by persistently high energy prices, with Brent crude holding above US$104 per barrel.
Newsmaker Analysis: The yen's weakness indicates that the market is focused not only on the magnitude of interest rate hikes but also on the central bank's subsequent policy trajectory. Although the Bank of Japan (BoJ) has begun policy normalization, Kazuo Ueda's cautious stance leaves the market uncertain about the pace of future rate increases. In the short term, USD/JPY movements will hinge heavily on the policy divergence between the BoJ and the Federal Reserve, particularly if the dollar remains strong due to expectations of higher U.S. interest rates. (arl)
Source: Newsmaker.id