Yen Rises On BoJ's Hawkish Pause

(RTTNews) - The Japanese yen strengthened against other major currencies in the Asian session on Friday, after the Bank of Japan left its key interest rate unchanged after a hike last month as underlying inflation is assessed to be consistent with the 2 percent inflation target.

The policy board, governed by Ueda Kazu, voted 8-1 in favor of holding the interest rate at 1.25 percent, the highest since 1995.

The decision was in line with expectations. The bank had raised the rate by 25 basis points each in June and September. Markets widely anticipate the bank to lift the rate again in December.

The board also decided to increase the pace of exchange-traded fund sales to approximately JPY 860 billion annually, up from the current 330 billion yen per year.

"…underlying CPI inflation is at a level that is generally consistent with the price stability target of 2 percent, and is expected to remain at around that level," the bank said in a statement. Asian stock markets traded mostly lower, dragged by South Korean and Japanese markets on continued sell-off in semiconductor and technology stocks amid concerns over the sustainability of the AI and technology investments. The uncertainty over the resolution in the Middle East conflict also continues to weigh on market sentiment.

In economic news, retail sales in Japan advanced 2.3 percent on year in September 2026, below market expectations for a 3.3 percent rise and easing from an upwardly revised 2.9 percent increase in the previous month, marking the slowest growth in three months. It was the seventh consecutive month of growth in retail sales. On a monthly basis, retail sales dropped 0.7 percent in September, following a revised 0.9 percent fall in August, marking the second consecutive monthly decline.

Japan's unemployment rate edged down to 2.4 percent in September 2026, below market expectations and August's figure of 2.5 percent. The number of unemployed fell by 100 thousand to 1.67 million, while employment increased by 340 thousand to a four-month high of 68.68 million. Meanwhile, the jobs-to-applicants ratio rose to 1.19 from 1.18 in each of the previous three months, exceeding consensus of 1.18.

Core consumer prices in Tokyo's central wards increased 2.6 percent on year in October 2026, following a 2.7 percent rise in September and in line with expectations. It was the first deceleration in five months, following the fastest increase since November 2025 in September.

Japan's industrial production increased by 2.2 percent month-over-month in September 2026, reversing a 2.4 percent decline in the previous month and surpassing market estimates of 1.3 percent, preliminary data showed. It was the fastest growth since January. On an annual basis, production rose 1.9 percent, down from 2.7 percent in August, marking the softest growth in four months.

In the Asian trading today, the yen rose to a 4-day high of 157.12 against the U.S. dollar and a 3-day high of 110.38 against the Australian dollar, from yesterday's closing quotes of 157.71 and 110.87, respectively. If the yen extends its uptrend, it is likely to find resistance around 154.00 against the greenback and 109.00 against the aussie.

Against the euro, the pound and the Swiss franc, the yen advanced to 175.96, 210.57 and 191.37 from a recent more than 1-week lows of 176.59, 211.30 and 192.02, respectively. On the upside, 174.00 against the euro, 207.00 against the pound and 190.00 against the franc are seen as the next resistance levels for the yen.

Against the New Zealand and the Canadian dollars, the yen climbed to 2-day highs of 88.48 and 112.53 from Thursday's closing quotes of 88.98 and 112.72, respectively. The yen may test resistance around 85.00 against the kiwi and 110.00 against the loonie.

Looking ahead, Eurozone GDP data for the third quarter is due to be released in the European session.

In the New York session, Canada GDP data for August, U.S. employment cost - benefits for the third quarter, Germany CPI data for October, U.S. Chicago PMI for October and U.S. Baker Hughes oil rig count data are slated for release.