USD/JPY: Yen Declines as Ueda Stands Firm on Interest Rates Despite Rising Inflation.

USD/JPY: Yen Declines as Ueda Stands Firm on Interest Rates Despite Rising Inflation.

Highlights :
• Yen weakens past ¥153.50
• Ueda’s remarks shake the market
• U.S. inflation data awaited today

Dollar Strengthens as Yen Faces Pressure
On Wednesday morning, the USD/JPY pair surged near ¥153.50 following remarks by Kazuo Ueda, Governor of the Bank of Japan (BoJ). Speaking in parliament, Ueda stated that the central bank has no plans to raise interest rates or scale back its stimulus measures anytime soon.

This announcement caused the yen to weaken, as forex traders had been expecting BoJ to hint at a possible rate hike, but instead, they received the opposite confirmation.

Japan’s Inflation Remains High
Ueda acknowledged that rising consumer prices are impacting households, particularly the soaring cost of fresh food and essential goods. Japan’s inflation rate climbed 3.6% in December 2024 year-over-year, surpassing the forecasted 3.0%.

"The increase in food prices, especially fresh food, may not be just a temporary phenomenon and could influence consumer behavior and long-term inflation expectations," Ueda stated.

Yen Continues to Struggle
Despite the BoJ raising interest rates to 0.5%, the highest level since 2018, the yen failed to maintain its strength, and the U.S. dollar regained dominance.

Markets are now closely watching the release of U.S. Consumer Price Index (CPI) data, expected to show a 2.9% year-over-year increase. The outcome could influence the direction of both the U.S. dollar and the yen in the short term.