Ueda Bank of Japan Governor cautious on rate hikes; with US PCE forecast above expectations, USD/JPY rises to the upper 150 yen range.

【7/31Market Overview

During Tokyo time, dollar/yen saw broad profit-taking ahead of the previous day’s substantial rally. In addition to observations of dollar sales by Japanese exporters at month-end, the Bank of Japan decided to keep policy rates unchanged at the monetary policy meeting, and the outlook report raised the price outlook for fiscal year 2025, which dampened sentiment, pushing USD/JPY down to 148.59 yen. In European hours, Governor Ueda indicated in a press conference that “if the outlook materializes, we will continue to raise the policy rate,” and that “inflation upside alone does not justify tightening,” and that the core price increase has not reached 2%, keeping a accommodative monetary policy, which led to dollar selling and USD/JPY rising to the 149 yen area. In New York time, the six-month PCE price index (deflator) rose more than expected, with the core deflator year-over-year surpassing expectations, and the growth rate of the employment cost index for the six-month period also beating forecasts, signaling persistent inflationary pressure in the United States, pushing USD/JPY to 150.84 yen, a near3/28 high, marking the first time in about4 months.

【8/1Market View