Japanese Yen Outlook: USD/JPY Dips Following Japan Services PMI Release

Japan Services PMI and Central Bank Policy in Focus

On Wednesday, January 7, early market activity centered on the S&P Global Japan Services PMI, developments from the Bank of Japan, and movements in the USD/JPY exchange rate. The performance of Japan’s service industry, which makes up nearly 70% of the nation’s GDP, remains crucial for the central bank as it evaluates labor trends and inflation.

This week, Bank of Japan Governor Kazuo Ueda indicated that additional interest rate increases could be on the horizon if economic growth and inflation meet the central bank’s expectations. His remarks came after last week’s Summary of Opinions, which reflected a more hawkish stance from policymakers. The likelihood of further rate hikes by the BoJ, combined with a more accommodative approach from the Federal Reserve, points to a bearish outlook for the yen in the medium term.