Ella 
USD/JPY fell for a second day in a row, trading around 141.20 during the Asian session on Wednesday. The Japanese yen (JPY) remains strong following a speech by Bank of Japan (BoJ) board member Junko Nagakawa.
Junko Nagakawa, a member of the Bank of Japan’s board of directors, said that if the economy and prices are in line with the central bank’s forecasts, the central bank may adjust the extent of its loose monetary policy. Although the Bank of Japan raised interest rates in July, real interest rates remain deeply negative and loose monetary conditions remain in place. If long-term rates surge, the Bank of Japan may reconsider its tapering plans if needed at its policy meeting.
The USD/JPY pair has also been driven lower by contrasting monetary policies between the Bank of Japan and the US Federal Reserve, which has been encouraging unwinding of carry trades and boosted demand for the Japanese currency. Bank of Japan Governor Kazuo Ueda reiterated that the central bank will continue to raise interest rates as long as Japan’s economy meets the bank’s expectations by fiscal 2025.
The U.S. dollar (USD) remains subdued as Treasury yields continue to fall ahead of the release of U.S. Consumer Price Index (CPI) data. The upcoming inflation report may provide new clues on the potential extent of the Federal Reserve’s (Fed) interest rate cut in September. In addition, recent U.S. labor market reports have also cast doubt on the possibility of an aggressive rate cut by the Federal Reserve.
According to the CME FedWatch tool, the market fully expects the Fed to cut interest rates by at least 25 basis points at its September meeting. The odds of a 50 basis point rate cut fell slightly to 31.0% from 38.0% a week ago.
