Japanese Yen pares gains as Ueda offers little clarity on the next rate hike

• USD/JPY recovers to around 157.70 after hitting session lows of 157.12
• Further interest rate rises remain on the agenda, BoJ Governor Ueda signals, without clarifying their timing.
• Interest rates remained at 1.25% following the BoJ’s monetary policy meeting, in line with widespread expectations.

From session lows of 157.12, USD/JPY has recovered to around 157.70, leaving it flat on the daily chart. The Japanese Yen (JPY) is surrendering its earlier gains against the US Dollar (USD) on Friday, with comments from Bank of Japan (BoJ) Governor Kazuho Ueda offering no support to the currency.

Describing Japan’s “financial conditions are accommodative” earlier on Friday, Ueda expressed confidence that the economy would maintain moderate growth in the near term. He also reaffirmed that the bank would “continue to raise the policy rate”, while stressing the need to monitor the impact of FX, AI and the Middle East.

BoJ signals sustained 2% inflation as Yen outlook hinges on gradual tightening

At 7.2/10, the FXS Speechtracker score sits slightly below the speaker’s historical average of 7.7/10. A modest hawkish bias is evident in the emphasis on underlying CPI being consistent with the 2% target. Nevertheless, references to accommodative financial conditions, government support measures and expectations of only moderate growth point to a cautious, data-dependent approach rather than aggressive tightening.

Before Ueda spoke, the BoJ had maintained its benchmark interest rate at 1.25%, matching widespread expectations, and announced that inflation had reached the 2% target established in 2013. According to its statement, the bank expects core inflation to remain broadly consistent with its price target, with inflation risks still tilted to the upside.

Ahead of the European session’s opening, the US Dollar is meanwhile recovering earlier losses as a modest shift towards risk aversion supports demand for safe-haven assets. A 12% decline on Thursday marked the worst day on record for shares in Google's Alphabet and weighed on Asian markets on Friday. Concerns about an AI bubble have sharply weakened investors’ appetite for equities.