Yen Slides Post BoJ Governor’s Dovish Comments

The USD/JPY pair recorded a rise of about 0.2% amid pressure on the Japanese yen following the release of negative data from the Japanese labor market. The unemployment rate in August rose by 0.3 percentage points to 2.6%, its highest level in 13 months, compared to expectations of 2.4%.

Dovish comments made by Bank of Japan (BoJ) Governor Kazuo Ueda also contributed to the pressure on the Japanese currency. He emphasized the importance of maintaining accommodative financial conditions, which lowered expectations for an interest rate hike later this month.

Furthermore, a rise in US Treasury yields bolstered the dollar against the yen, driven by the widening yield differential between the two countries.

Nevertheless, some factors limited the yen’s losses. Most notably, the 10-year Japanese government bond yield rose to 1.675%, its highest level in 17 years. This, along with short-covering ahead of Saturday’s election to choose the leader of the ruling Liberal Democratic Party, helped cap the yen’s decline.

In a relatively positive sign, Japan’s Composite Purchasing Managers’ Index (PMI) for September was revised upward to 51.3 from the prior estimate of 51.1, reflecting a slight improvement in economic activity.