Japanese yen extends losses, wage growth expected to fall

The Japanese yen is down for a second straight day. In the European session, USD/JPY is trading at 144.67, up 0.59% on the day.

The Bank of Japan released the minutes of its March meeting today. At the meeting, the BoJ held the key policy rate at 0.5% in a unanimous vote. According to the minutes, members expressed concern about the downside risks to Japan's economy due to the US tariffs, which were not announced until April.

The BoJ met last week and again held rates. Governor Ueda said that the uncertainty over US trade policy remained "extremely high" and the tariffs would weigh on Japan's economy.

The BoJ is still looking to raise rates but is waiting to see how the tariff issue plays out, with the US and Japan currently holding trade talks. The central bank will be keeping a close eye on Friday's wage growth, which is expected to ease to 2.4% from 2.7%. The BoJ has said that stronger wage growth is key to achieving sustainable 2% inflation.

Fed holds rates

The Federal Reserve maintained rates on Wednesday, as widely expected. There was plenty of anticipation ahead of the meeting, as Fed Chair Powell was expected to push back against President Trump who has publicly called on Powell to lower rates.

Powell said that if the tariffs stayed in place, they would likely lead to stagflation, a toxic combination of high inflation and a rise in unemployment. Powell held his ground, saying that the Fed would 'wait and see' before making any rate moves.

The markets have responded to Powell's comments by lowering the odds of a June rate hike to 17%, a huge change from 58% a week ago.

USD/JPY Technical

• USD/JPY has pushed above resistance at 144.43 and put pressure on resistance at 145.02 earlier.
• 143.40 and 142.81 are providing support