The Japanese yen extended its gains on Wednesday after strong GDP data reinforced confidence in Japan’s economic outlook, pushing USD/JPY below the 152.00 mark. The yen’s rally comes as investors react to signs of improving domestic growth, increasing speculation that the Bank of Japan (BoJ) may be inching closer to a policy shift.
Japan’s latest GDP figures showed stronger-than-expected expansion, fueling optimism that the economy is recovering despite lingering global uncertainties. The data has strengthened the case for the BoJ to gradually move away from its ultra-loose monetary policy, a shift that would make the yen more attractive against the US dollar.
Meanwhile, the US dollar weakened, pressured by a pullback in Treasury yields as traders reassessed the Federal Reserve’s rate trajectory. While the Fed has signaled caution in rushing to cut interest rates, softer US economic data has raised concerns that the central bank may have to adjust its stance sooner than expected. This has weighed on the greenback, giving further momentum to the yen’s advance.
USD/JPY 1-D Chart as of February 17, 2025 (Source: TradingView)
The decline in USD/JPY also comes amid growing intervention risks, as Japanese officials have repeatedly signaled discomfort with excessive yen depreciation. While no direct measures have been taken, the threat of intervention remains a factor that could discourage aggressive dollar buying and add to yen strength in the near term.
Despite the yen’s recent surge, analysts caution that further gains may depend on how global markets react to upcoming US economic data and Federal Reserve commentary. If US inflation remains sticky and the Fed stays hawkish, the dollar could regain ground, putting renewed pressure on the yen. However, continued signs of strength in Japan’s economy could reinforce the BoJ’s tightening bias, keeping the yen’s bullish momentum intact.
For now, USD/JPY remains on the back foot, with traders closely monitoring policy signals from both the Federal Reserve and the Bank of Japan. As markets digest the latest GDP data, yen bulls appear to have the upper hand, but volatility is likely to persist in the sessions ahead.
