USD/JPY Treads Water Above 155.00 As BoJ Reinforces Gradual Tightening Path
USD/JPY holds ground after three days of gains, trading around 155.20 during the Asian hours on Monday. The upside of the pair could be limited as the Japanese Yen (JPY) remains calm following the Bank of Japan’s (BoJ) January Summary of Opinions.
BoJ Summary of Opinions suggested the risk of falling behind the curve has not risen materially, though timely policy execution is becoming more important. With real rates still deeply negative, members agreed that further rate hikes would be appropriate if the outlook for growth and inflation holds, while maintaining a gradual tightening path.
Japanese Prime Minister Sanae Takaichi stated over the weekend that a weak Japanese Yen (JPY) could present significant opportunities for export-oriented industries and help cushion the automobile sector against the impact of US tariffs.
The pair could further gain ground as the US Dollar (USD) gains ground after President Donald Trump’s nomination of Kevin Warsh as the next Federal Reserve (Fed) Chair. Markets interpreted the Warsh’s appointment as signaling a more disciplined and cautious approach to monetary easing.
US producer-side inflation firmed, moving further away from the Federal Reserve’s 2% target and reinforcing the central bank’s policy stance. US PPI inflation holds steady at 3.0% year-over-year (YoY) in December, unchanged from November and above expectations for a moderation to 2.7%. Core PPI, excluding food and energy, accelerated to 3.3% YoY from 3.0%, defying forecasts for a decline to 2.9% and highlighting persistent upstream price pressures.
St. Louis Fed President Alberto Musalem said additional rate cuts are not warranted at this stage, characterizing the current 3.50%–3.75% policy rate range as broadly neutral. Similarly, Atlanta Fed President Raphael Bostic urged patience, arguing that monetary policy should remain modestly restrictive.
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