USD/JPY scales fresh 30-week high on diverging central bank monetary policies

Key points

USD/JPY traded in proximity to a fresh 30-week high registered earlier on Tuesday, after the Bank of Japan maintained its ultra-accommodative policy stance last Friday.

The BoJ left its benchmark short-term interest rate without change at -0.10% at its June policy meeting and also kept a 0% cap on 10-year bond yields set under its yield curve control policy.

BoJ policy makers said they would patiently continue with monetary easing and respond to economic uncertainties and price dynamics.

The Japanese currency has again faced pressure due to deepening monetary policy divergence between Japan and other developed nations.

“We believe that Japan’s economy is recovering solidly compared to other major economies and will continue to outperform in the future. But, if monetary policy fails to reflect this shift of economic fundamentals and the BOJ keeps its dovish policy, then the yen should depreciate even more,” Min Joo Kang, ING senior economist for South Korea and Japan, wrote in a client note, cited by Reuters.

In other news, Japanese Finance Minister Shunichi Suzuki said earlier on Tuesday that the nation’s currency policy would not immediately change after the United States removed Japan from its monitoring list.

“As for currency policy, we’ll keep close communications with the United States and other countries. The fact that Japan was removed from the list doesn’t immediately mean that we would respond in a different way from before or there’s any impact,” Suzuki told reporters.

According to a Treasury official, Japan was removed from the monitoring list since it only met 1 of the 3 criteria for two consecutive monitoring periods.

As of 9:33 GMT on Tuesday USD/JPY was retreating 0.23% to trade at 141.634. During the early phase of the Asian session the major Forex pair went up as high as 142.251. The latter has been the pair’s strongest level since November 21st 2022 (142.252).