- BOJ Economy Concerns
- Weak Economic data
- USD/JPY Catalysts
Japanese Yen remained under pressure on Friday, heading into the weekend, on Bank of Japan arousing concerns about Japan’s economy. USD/JPY bounce-back from 1-week lows continued to gather steam as traders remained skeptical about Japan’s economy that has contracted for two consecutive quarters.
USD/JPY was seen rising by more than 0.2% as Yen’s weakness continued to fuel bounce back charter after a recent drop to one-week lows.
Downbeat inflation data continued to fuel fears that the Japanese economy is in its biggest contraction in recent years. May’s Consumer Price Index came in at lows of 0.1%, in line with forecast. The National CPI ex-Fresh Food, known as the core CPI, on the other hand, dropped to lows of -0.20% against an expected -0.1%.
Worried about the economic situations, policymakers already hinted at the possibility of increasing the bond-buying program in a bid to boost liquidity in the struggling economy. The policymakers have also sought to quash growing concerns by reiterating that even though the economy is in a downward trajectory, sharp deterioration has ended.
The government has also upgraded its view on consumer spending, pointing out signs of improvement as retailers and restaurants open amidst the COVID-19 threat.
USD/JPY exchange rate is at the mercy of how the Dollar reacts to geopolitical tensions between China and Italy. Tensions between the U.S and China over Hong Kong have so far led to the strengthening of the U.S dollar resulting in the USD/JPY rising to three-month highs. The greenback tends to strengthen across the board in times of geopolitical and economic crises.
An absence of major economic data in Asia and the U.S session should keep the USD/JPY at the mercy of risk catalysts, which the U.S dollar is susceptible to. Similarly, the focus will be on FED speeches later in the day, likely to influence dollar strength and traders’ sentiments on USD/JPY.