Yen Rises As BoJ's Tamura Signals Rate Hikes

The Japanese yen strengthened against other major currencies in the Asian session on Thursday, as the Bank of Japan board member Naoki Tamura hinted about possible interest rate increases.

Speaking at an event in Nagano, BOJ's Tamura said interest rates could rise from 0.5 percent to 1 percent in the second half of 2025. Considering 1 percent to be a neutral rate, he underlined the necessity of modest rate increases to ascertain the ideal level for Japan's economy.

In January, the BOJ raised interest rates by 25 basis points to 0.5%, pointing to rising consumer expenditure and wages as the main causes of inflation. As it keeps an eye on the state of the economy, the central bank expects more rate increases.

Tamura assured that the forthcoming wage negotiations would be consistent with the Bank of Japan's 2% inflation target, thereby providing further rationale for incremental rate adjustments.

In the Asian trading today, the yen rose to near 2-month highs of 157.92 against the euro and 151.80 against the U.S. dollar, from yesterday's closing quotes of 158.73 and 152.58, respectively. The yen may test resistance around 153.00 against the euro and 149.00 against the greenback.

Against the pound and the Swiss franc, the yen advanced to nearly a 3-week high of 189.81 and more than a 2-month high of 168.50 from Wednesday's closing quotes of 190.79 and 169.21, respectively. If the yen extends its uptrend, it is likely to find resistance around 187.00 against the pound and 166.00 against the franc.

Looking ahead, the Bank of England is set to announce its monetary policy decision at 7:00 am ET. The BoE is expected to cut its benchmark rate by a quarter-point to support economic growth.

Markets widely expect the BoE to lower the bank rate to 4.50 percent from 4.75 percent. The BoE had reduced the rate by 25 basis points each in August and November last year.

At 9:15 am ET, the BoE governor Andrew Bailey will deliver a speech about the monetary policy decision at a press conference.

In the New York session, U.S. weekly jobless claims data and Canada Ivey PMI data for January are slated for release.