• USD/JPY returns to the 157.70 area from session lows at 157.12
• BoJ Governor Ueda hints at further interest rate hikes but remains vague about the timing.
• The BoJ left interest rates at 1.25% after its monetary policy meeting, as widely expected.

The Japanese Yen (JPY) is giving back previous gains against the US Dollar (USD) on Friday, and Bank of Japan (BoJ) Governor Kazuho Ueda’s comments have failed to support the Japanese currency. The USD/JPY pair has returned to the 157.70 area from session lows at 157.12, turning flat on the daily chart.

Ueda affirmed earlier on Friday that Japan’s “financial conditions are accommodative” and showed confidence that the economy will keep growing moderately in the near term. Regarding monetary policy, Ueda affirmed that the bank will “continue to raise the policy rate” although he also said that they need to watch the impact of FX, AI and the Middle East.

BoJ flags sustained 2% inflation, keeping Yen focus on gradual tightening

The FXS Speechtracker shows a 7.2/10 score, slightly below the speaker’s historic 7.7/10 average. The emphasis on underlying CPI at a level consistent with the 2% target highlights a modestly hawkish tilt, although the stress on accommodative financial conditions, government support measures, and an outlook of only moderate growth reveals a cautious and data-dependent path rather than aggressive tightening.

Previously, the BoJ had left its benchmark interest rate on hold at 1.25%, as widely expected, and announced that inflation reached the 2% target set in 2013. Looking ahead, the bank sees core inflation steady around levels consistent with the price target while inflation risks will remain skewed to the upside, according to the statement.

The US Dollar, on the other hand, is retracing previous losses ahead of the European session opening, as a moderate risk-off mood boosts demand for safe havens. Shares of Google’s Alphabet had their worst day on record, with a 12% sell-off on Thursday dragging Asian markets down on Friday, with concerns of an AI bubble crushing investors’ appetite for equities.