The Japanese Yen continues to drop against the US Dollar as investors remain uncertain about the Bank of Japan (BoJ) extending the policy normalization process. With Japan’s economy estimated to have contracted by 0.4% in the January-March period, concerns are rising about the impact on the Yen’s value.
The USD/JPY pair reached 156.00 in Monday’s American session, with investors worried that inflation in Japan is being driven by a weak Yen rather than sustainable economic growth. The BoJ’s Summary of Opinions from the April meeting highlighted the inflationary pressures caused by the weak Yen, prompting discussions about possible rate hikes.
Looking ahead, the focus will be on Japan’s Q1 Gross Domestic Product (GDP) data, set to be released on Thursday. Expectations are for a contraction of 0.4% in the January-March period, indicating a challenging start to the year for the Japanese economy.
Meanwhile, in the US, the Dollar is facing its own challenges as concerns grow over the strength of the labor market. Weak Nonfarm Payrolls data for April and lower Job Openings in March have raised doubts about the US economy’s resilience. The US Dollar Index (DXY) dropped to 105.00 as a result.
Investors will be closely watching US inflation data, including the Producer Price Index (PPI), Consumer Price Index (CPI), and Retail Sales figures for April. The outcome of these reports will provide insights into the Federal Reserve’s interest rate outlook, with expectations for rate cuts in September if inflation softens more than anticipated.
Overall, the Japanese Yen’s long-term outlook remains strong, with technical analysis suggesting a positive trend for the currency. However, uncertainties surrounding the BoJ’s policy decisions and economic data releases will continue to influence the Yen’s value in the coming days.
