Yen remains volatile, BoJ holds rates steady

The Japanese yen recorded some volatility following three consecutive days of declines.

The market reacted to the Bank of Japan’s (BoJ) decision to maintain interest rates unchanged.

This move, which was anticipated, reflects the BoJ’s focus on economic growth concerns and the potential impact of the escalating trade tensions.

The BoJ’s cautious stance could limit significant yen appreciation in the near term. In his comments, BoJ Governor Kazuo Ueda emphasized that U.S. trade policies and tariffs present substantial risks to Japan’s economic and inflation outlook, contributing to heightened uncertainty.

Ueda indicated that, should economic conditions align with the BoJ’s forecasts, the central bank could continue to raise interest rates in the future.

Higher rates could support a stronger yen. However, the immediate focus remains on the broader economic implications.

As such, global economic uncertainties, including U.S. tariff policies on steel, aluminium, and autos, could weigh on Japan’s export-driven economy. While Japan’s exports grew by 11.4% year-on-year in February, the trade surplus came in below expectations, adding further concerns to the economic outlook, impacting the yen near term movements.

The Japanese currency could react to the release of new economic data such as inflation figures tomorrow as well as the Fed’s interest rates decision later today.