Markets analysis on behalf of Christopher Tahir – Senior Market Strategist at Exness 2x22y
21st February 2025
The Japanese yen retreated as concerns about the country’s debt burden increased and the USD rebounded to a certain extent. Rising inflation adds pressure on the Bank of Japan (BoJ) to tighten its monetary policy. With inflation exceeding the BoJ’s 2% target, speculation is growing that the central bank may adjust its policy. Higher interest rates could help prevent further depreciation of the yen, which has been strained by prolonged monetary easing.
In the bond market, yields on 10-year government bonds declined but remained near a 15-year high, reflecting concerns over inflation and potential tightening. Higher yields could attract foreign investment, ing the yen. At the same time, BoJ Governor Kazuo Ueda confirmed the central bank’s readiness to increase bond purchases if yields rise sharply, weighing on yields. This cautious approach aims to balance economic stability with market forces, preventing rapid tightening. Markets could remain attentive to the BoJ’s future actions and their impact on the direction of the yen.