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Rising bets on a July rate hike have also driven Japanese Government Bond (JGB) yields higher. Higher JGB yields and the stronger Yen have fueled speculation about another Yen carry trade unwind.
Despite the threat of a Yen carry trade unwind triggering market disruption, BoJ Governor Kazuo Ueda remained resolute in raising interest rates. On March 12, Governor Ueda dismissed concerns about rising JGB yields, saying:
“Long-term interest rates move on various factors. But the biggest determinant is the market’s forecast on the outlook for our short-term policy rate. It’s natural for long-term rates to move in a way that reflects such market forecasts.”
On Friday, March 14, investors should monitor updates from the spring wage negotiations and BoJ commentary. Higher-than-expected wage growth signals could boost bets on a Q2 2025 rate hike, dragging the USD/JPY pair toward 145. Conversely, disappointing updates may signal a less hawkish BoJ rate path, potentially pushing the pair toward 150.
USD/JPY Trends: US Consumer Sentiment in Focus
Later in the US session, the University of Michigan’s Survey of Consumers will influence US dollar demand. Weaker-than-expected consumer sentiment could signal a pullback in consumer spending. Downward trends in consumer spending could dampen inflationary pressures, supporting a more dovish Fed rate path. Rising bets on multiple 2025 Fed rate cuts could pull the USD/JPY toward the March 11 low of 146.537.
Conversely, rising consumer sentiment and higher inflation expectations could curb Fed rate cut bets, potentially driving the USD/JPY pair toward the 149.358 resistance level.
