USD to Yen Rate Stabilizes at 152 After Jump in Japan GDP

USD/JPY rebounded early last week after suffering a sharp four-cent decline the previous week, driven by the Bank of Japan’s (BOJ) hawkish rate hike, which strengthened the yen. Rising inflation and increased household spending have also contributed to the yen’s momentum. However, buyers couldn’t keep the gains and gave back most of them, closing near 152.

USD/JPY Chart Weekly – The 50 SMA Still Holding As Support

Since turning bullish in September, following a 20-cent drop during the summer that pushed the pair below 140, USD/JPY has maintained an upward trajectory. A retracement in late November tested the 50-week SMA (yellow) as support, which held firm, allowing the pair to resume its bullish trend. Currently, another pullback is underway, but once again, the 50-week SMA is acting as support. If this level continues to hold, another rebound may be on the horizon. However, positive economic developments for Japan could intensify selling pressure, potentially driving USD/JPY below the key 150 level. A confirmed break below the 50-week SMA would signal a shift in trend.

Japan’s Household Spending Surges

Japan’s household spending surged in December, marking a strong recovery in consumer activity. Year-on-year, spending increased by 2.7%, well above the 0.2% forecast and rebounding from November’s 0.4% decline. On a monthly basis, spending rose by 2.3%, defying expectations of a 0.5% drop and accelerating from November’s modest 0.4% gain. The sharp increase suggests improving consumer confidence and may play a role in shaping the Bank of Japan’s monetary policy as inflationary pressures persist.

BOJ’s Hawkish Shift

BOJ board member Tamura Naoki reinforced expectations of tighter monetary policy with his recent comments. Speaking at a gathering of local leaders in Nagano, Tamura emphasized the need for gradual short-term interest rate hikes, potentially reaching 1% by the latter half of fiscal 2025. A known hawk, he warned that inflation risks are increasing and that the BOJ must act to bring interest rates closer to neutral levels, ensuring economic stability.

With rising inflation, strong household spending, and growing hawkish sentiment within the BOJ, the yen could see further support, which may challenge USD/JPY’s bullish outlook in the coming months.

USD/JPY Live Chart 

USD/JPY

Skerdian Meta

Lead Analyst

Skerdian Meta Lead Analyst.
Skerdian is a professional Forex trader and a market analyst. He has been actively engaged in market analysis for the past 11 years. Before becoming our head analyst, Skerdian served as a trader and market analyst in Saxo Bank’s local branch, Aksioner. Skerdian specialized in experimenting with developing models and hands-on trading. Skerdian has a masters degree in finance and investment.