The Japanese yen rose in Asian trading on Thursday against a basket of major and minor currencies, resuming its recovery against the US dollar and stabilizing above a 20-month low, supported by renewed buying from lower levels following the Bank of Japans monetary policy decision.

The Bank of Japan kept interest rates unchanged for the second consecutive meeting, stating that the Japanese economy is recovering moderately despite uncertainty stemming from geopolitical conflicts.

Price overview

Japanese yen exchange rate today: the dollar fell 0.2% against the yen to 159.54, from the session opening level of 159.81, after recording a high of 159.85.

The yen ended Wednesdays trading down more than 0.5% against the dollar, marking its first loss in three days, after hitting a 20-month low of 159.90.

Bank of Japan

In line with most market expectations, the Bank of Japan on Thursday kept its benchmark interest rate unchanged at 0.75%, the highest level since 1995, for the second consecutive meeting.

The decision to hold rates was approved by an 81 vote, with one member calling for a 25 basis point increase to 1.0%, as policymakers preferred to pause and assess recent economic developments.

The Bank of Japan warned that the war with Iran and tensions in the Middle East are pushing crude oil prices higher, creating upward pressure on core inflation in Japan.

The central bank added that while core inflation is expected to temporarily slow below 2% in the near term due to easing rice price increases, the Middle East conflict will exert upward pressure driven by the recent rise in crude oil prices.

Japanese interest rates

Following the meeting, market pricing for a 25 basis point rate hike at the April meeting remained below 30%.

Investors are awaiting further data on inflation, unemployment, and wages in Japan to reassess these expectations.

Kazuo Ueda

Bank of Japan Governor Kazuo Ueda is scheduled to speak shortly on the outcome of the policy meeting, with his comments expected to provide further strong clues about the future path of policy normalization and interest rate hikes this year.

Opinions and analysis

Analysts at Capital Economics wrote that the Bank of Japan did not reveal much by keeping rates unchanged today, but they still expect a rate hike at the next meeting in April.

They added that the brief statement provided little clarity on the future path of monetary policy, and that more insight is likely to come from Governor Uedas press conference later today.

US dollar

The dollar index fell 0.25% on Thursday, reflecting weakness in the US currency against a basket of global currencies.

On Wednesday, the Federal Reserve kept interest rates unchanged for the second consecutive meeting, while projecting higher inflation, stable unemployment, and only one rate cut this year.

Federal Reserve Chair Jerome Powell described this outlook as highly uncertain, as policymakers assess the impact of US-Israeli strikes on Iran.