Yen’s Slide: Is Japan’s Caution Costing Too Much?

The Japanese Yen’s recent slide against the US Dollar sparks a question: is the Bank of Japan (BoJ) too cautious for its own good? The USD/JPY pair climbed 0.45% to 145.75 on Wednesday, rebounding from the 21-day EMA support near 144.60. Meanwhile, the BoJ’s latest Summary of Opinions reveals a split among policymakers, with board member Naoki Tamura pushing for faster rate hikes to meet the 2% inflation target sooner. This internal divide, coupled with a stabilizing US Dollar, keeps the Yen under pressure.

BoJ’s Policy Rift

The BoJ’s June meeting exposed tensions. Some members favor holding steady, citing slow growth and global risks like trade tensions. Others, including Tamura, see persistent inflation and wage gains as signals for tighter policy. Tamura’s hawkish stance in Fukushima, warning of faster-than-expected inflation, contrasts with the board’s broader preference for accommodation. This indecision muddies market expectations, weakening the Yen.

USD Strength and Fed’s Role

Across the Pacific, the US Dollar Index steadied near 98.00 after hitting three-year lows. Federal Reserve Chair Jerome Powell’s cautious testimony before the Senate offered little clarity on rate cuts, supporting the Dollar’s recovery. Upcoming US data, like Q1 GDP and Core PCE inflation, will shape USD/JPY’s path, highlighting the Fed-BoJ policy gap.

The Yen’s future path hinges on the BoJ’s next move. Delaying rate hikes risks further currency weakness, especially if inflation accelerates. Tamura’s call for action deserves attention—waiting too long could force harsher measures later. With Tokyo CPI data looming, Japan must decide: act now or brace for a rougher ride.