Yen Weakness Continues After Bank of Japan Meeting, U.S. PCE Deflator Could Further Accelerate It

The yen continues to weaken. The Bank of Japan's policy meeting ended as expected, with interest rates unchanged. The statement lacked novelty, leading to further weakening of the yen in the market. The inflation outlook in the outlook report was revised upwards, predicting around 2% for the next three years, but there was no surprise reaction as it had been reported beforehand.

In the upcoming international markets, the U.S. PCE Deflator and personal income and expenditure data will be key focal points. There was a sense of caution in the market due to the strength of the GDP deflator in yesterday's preliminary U.S. GDP data for the first quarter. Today's PCE Deflator is expected to see a slight increase to +2.6% year-over-year, up from the previous +2.5%, while the core year-over-year is expected to slightly decelerate to +2.7% from the previous +2.8%. Overall, there seems to be a perception of persistent strong inflation. If the results are close to expectations, continued dollar strength, along with rising U.S. bond yields, can be anticipated.

How will the market approach the weekend after passing through a series of events? Currently, further yen weakening seems likely, but if interventions from the government or the Bank of Japan occur, especially during the thin trading hours in NY, the market could become very turbulent. Caution is necessary regarding the extent of yen depreciation.

The yen continues to weaken. However, about two hours ago, USD/JPY suddenly dropped. It is unclear if this was due to intervention, but caution is still advised for the upper 156 yen range, and I have recently placed a sell order on USD/JPY.