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by On Friday, the Japanese yen hovered around $144.8 (USD/JPY), marking its second month of steady gains. This strength is mainly due to the differing approaches to monetary policy between Japan and the United States.
USDJPY Fundamental Analysis – 30-August-2024
Bank of Japan’s Possible Rate Hike
The Bank of Japan (BoJ) has hinted at raising interest rates again if the economic conditions and inflation targets align with their forecasts. This proactive stance reflects the BoJ’s commitment to controlling inflation and maintaining economic stability.
US Federal Reserve’s Shift Toward Rate Cuts
In contrast, the Federal Reserve in the United States is anticipated to begin reducing interest rates as early as September. This move comes as inflation pressures ease and concerns about the labor market grow.
The Fed’s approach suggests cautious optimism about the US economy’s recovery but also acknowledges the risks that still exist.
Global Trend Towards Easing Monetary Policies
Other major central banks, particularly in Europe and the Asia-Pacific region, have also started to ease their monetary policies in response to slowing inflation. This trend indicates a shift from aggressive tightening to a more balanced approach as price pressures moderate worldwide.
Rising Inflation in Tokyo Signals Broader Trends
On the economic front, recent data revealed that Tokyo’s core inflation rate—a key predictor of nationwide price trends—rose to 2.4% in August. This was higher than the 2.2% increase predicted by analysts, signaling that inflationary pressures may be more persistent than previously thought.
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