The Japanese yen has lost ground for a third straight trading day. In the North American session, USD/JPY is trading at 149.32, up 0.08% on the day. Earlier, the yen weakened to 149.93, its lowest level in two weeks.
Bank of Japan likely to hold rates at 0.5% until later in 2025
The Bank of Japan meets early on Wednesday and is widely expected to maintain rates at 0.50%. The BoJ is in the midst of a tightening cycle butt is moving at a very slow pace.
After lifting rates out of negative territory a year ago, the central bank has raised rates twice more, including in January.
The tighter monetary policy reflects rising wages and higher inflation which appears to be sustainable. BoJ policymakers have telegraphed their intention to raise rates but have refrained from signalling when they will do so, which means each meeting remains somewhat of a guessing game. Investors will be looking for clues of the next rate hike from the rate statement and from Governor Kazuo Ueda’s press conference.
The US hasn’t singled out Japan with tariffs but the threat of a global trade war is very much on the minds of BoJ policymakers and a key reason why the BoJ is unlikely to make a move at Wednesday’s meeting. The BoJ is in a wait-and-see mode as it monitors US trade policy and the national wage agreement which will hike wages by over 5%.
US retail sales rise 0.2%
In the US, retail sales for February posted a weak gain of 0.2% m/m, recovering from the 1.6% decline in January but shy of the market estimate of 0.6%. Consumers are feeling pessimistic about the economy slowing down and rising inflation. The Trump administration’s tariff policy, which threatens to dampen the US economy and boost inflation is a significant concern for consumers.
