Ella 
The Japanese yen (JPY) turned sharply lower on Thursday, falling back to near the year’s low hit the previous day, but lacked follow-up due to uncertainty about the Bank of Japan’s (BOJ) future policy measures. Indeed, the Bank of Japan said earlier this week that financial conditions would remain accommodative but did not provide any guidance on the pace of policy normalization. Still, a source at the Bank of Japan told Nikkei that the early hike leaves room to consider another rate hike before the end of the year.
Separately, data released on Friday showed Japan’s consumer inflation rate remains well above the Bank of Japan’s 2% annual target. In addition, positive results from Japan’s spring wage negotiations showed that most companies have agreed to union demands for wage increases, which is expected to push up inflation in the coming months and support the prospect of further tightening by the Bank of Japan. This in turn helped the yen attract some bargain hunting during the Asian session amid speculation that Japanese authorities would intervene in the market to support the currency.
On the other hand, the US dollar fluctuated lower in the Asian market, losing part of the previous day’s gains, which is therefore seen as another factor that suppressed the US dollar/yen. Meanwhile, investors appear to have priced in Wednesday’s easing forecast from the Federal Reserve. This has kept U.S. Treasury yields higher, benefiting U.S. dollar bulls, with investors taking positions on the apparent decline in USD/JPY ahead of a speech scheduled for later this Friday from Federal Reserve Chairman Jerome Powell. Previously, caution was required.
