The Japanese yen weakened on Tuesday following comments from Bank of Japan (BoJ) Governor Kazuo Ueda, prompting the USD/JPY pair to rebound and trade 0.30% higher on the day around 145.00.
Speaking earlier in the session, Governor Ueda reiterated the BoJ’s cautious approach to monetary tightening, stating that interest rates would only be raised once the central bank has “enough confidence that underlying inflation nears or moves around 2%.”
Ueda acknowledged that Japan’s underlying inflation remains below the BoJ’s target, and emphasized that the bank continues to maintain negative real interest rates to support inflation reaching — and then holding — the 2% level sustainably and stably.
He also noted that the BoJ has limited room to respond with rate cuts if the economy or prices face significant downward pressure, given that the short-term interest rate is currently just 0.5%.
Market Reaction:
The yen slipped in response to Ueda’s remarks, as markets interpreted them as signaling no imminent policy tightening. The USD/JPY pair capitalized on the dovish tone, advancing to 145.00 as traders recalibrated expectations for the BoJ’s rate path.
