USD/JPY – Yen falls below 134 as US dollar gains strength

  • USD/JPY slips to 1-month low
  • US retail sales fall for second straight month
  • Fed members Waller and Bostic urge more rate hikes

Japanese yen extends losses

The Japanese yen took it on the chin on Friday, as USD/JPY jumped 0.90%. The yen has edged lower on Monday and fell as low as 134.22, its lowest level since March 15th. With expectations rising that the Fed will raise rates in May, the yen could remain under pressure and fall closer to the symbolic 135 line.

It was a light data calendar in Japan last week, giving investors plenty of time to focus on comments from new BoJ Governor Ueda. At the G-20 meeting in Washington, Ueda stuck to his script of “more of the same”, saying the Bank would continue its ultra-loose monetary policy. There has been pressure on Ueda to tighten policy, given that inflation hit 3.1% in February, higher than the 2% target.

The Bank of Japan has become an outlier as other central banks have raised rates in order to contain inflation. In fairness, inflation in Japan compares to the levels we are seeing in most developed economies. Former Governor Kuroda insisted that inflation has been driven by higher import costs rather than stronger domestic demand and said real wages would have to rise before the BoJ would consider raising rates. The problem is that real wages continue to fall – the decline of 2.6% in February, marked an 11th straight decline.

Until wage growth recovers, there is little chance that the BoJ will tighten policy. That doesn’t mean the BoJ won’t make any moves in the near future, especially if the yen continues to depreciate. In December, the BoJ blindsided the markets by widening the target band on 10-year government bonds, which sent the yen sharply higher.

Fed’s Waller, Bostic says more hikes needed

The US dollar powered higher on Friday despite a soft retail sales report, as a rise in inflation expectations and hawkish Fedspeak raised the odds of a rate hike in May.

UoM inflation expectations for the next 12 months jumped 4.6% in April, up sharply from 3.6% in March. Consumer confidence has been on the low side as inflation remains high, and the decline in retail sales was another sign that the US economy is losing steam.

Fed member Waller stated on Friday that the Fed would need to continue raising rates because inflation is “far above target” and the labor market remains “quite tight”. Waller warned that the Fed would have to keep rates at a high level for an extended period and for longer than the markets expected. Fed member Bostic urged one or two more 25-bp hikes before wrapping up the current rate-tightening cycle. The likelihood of a 25-bp increase in May jumped to 80% on Friday, up from 68% a day earlier, which propelled the US dollar to strong gains at the end of the week.


USD/JPY Technical

  • There is resistance at 134.60 and 135.42
  • 133.45 and 132.39 are providing support

Content is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Business Information & Services, Inc. or any of its affiliates, subsidiaries, officers or directors. If you would like to reproduce or redistribute any of the content found on MarketPulse, an award winning forex, commodities and global indices analysis and news site service produced by OANDA Business Information & Services, Inc., please access the RSS feed or contact us at Visit to find out more about the beat of the global markets. © 2023 OANDA Business Information & Services Inc.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental and macroeconomic analysis, Kenny Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in major online financial publications including, Seeking Alpha and FXStreet. Kenny has been a MarketPulse contributor since 2012.