The yen continues to fall due to interest rate differentials

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USD/JPY has risen to 161.65, with the market cautious ahead of today’s US Consumer Price Index (CPI) release. Still, the wide interest rate differential between the Bank of Japan (BoJ) and the Federal Reserve has weakened the yen.

Earlier this year, the BoJ abandoned its long-standing negative interest rate policy and adjusted interest rates to zero. However, this adjustment did not prevent the yen from depreciating, raising concerns about the continued decline in the yen exchange rate.

Investors are eagerly awaiting the BoJ’s July meeting, which is expected to make an important decision on bond purchases. The outcome of this meeting could mark a major shift in Japan’s monetary policy.