Yen Strengthens as Dollar Weakens and BoJ Speculates Rate

The Japanese yen rose to nearly 155.5 yen per dollar on Thursday, continuing its gains from the previous session as the dollar weakened sharply following the Federal Reserve's third interest rate cut this year and a less hawkish outlook than the market had expected.

Investors are now focusing on the Bank of Japan's meeting next week, where a rate hike is anticipated following comments from Governor Kazuo Ueda, who indicated that the bank is nearing its inflation target. Ueda's remarks after the meeting will be closely watched for guidance on policy direction through 2026.

Despite the yen's recent gains, it remains under pressure due to:

• Slowing economic growth in Japan,
• Financial challenges for the government,
• Large interest rate differentials with major economies, as Japanese interest rates remain among the lowest globally.

On the data front, the business confidence index for major industrial firms improved, reaching its highest level in a year during the quarter ending in December.