Forex News: Yen Falls Amid China-Japan Tension, BoJ Rate Hike

Yen Falls Amid China-Japan Tension, BoJ Rate Hike Doubts

(RTTNews) - The Japanese yen weakened against other major currencies in the Asian session on Friday, amid an intensifying China-Japan dispute, the uncertainty around the timing of the next Bank of Japan (BoJ) interest rate hike depressed the safe-haven JPY.

The safe-haven Japanese yen is further impacted by worries over Japan's fiscal condition and a steady performance across equity markets.

Asian stocks were mostly higher as investors braced for the release of all-important U.S. jobs data as well as a Supreme Court ruling on the legality of President Donald Trump's sweeping tariffs.

The jobs report will offer additional clues on the Federal Reserve's path for interest rates, with markets currently pricing in at least two quarter-point cuts in 2026.

The dollar traded higher as the U.S. Senate advanced a resolution aimed at curbing Trump's ability to take further military action against Venezuela.

In another development, Trump has ordered the purchase of $200 billion in mortgage bonds with the goal of easing housing costs through lower interest rates.

Strong Japan's Overall Household Spending report is countered by ongoing tensions between China and Japan.

In economic news, data from the Ministry of Internal Affairs and Communications showed that the average of household spending in Japan was up 2.9 percent on year in November, coming in at 314,242 yen. That beat forecasts for a decline of 1.0 percent following the 3.0 percent drop in October.

On a seasonally adjusted monthly basis, household spending jumped 6,2 percent - again topping expectations for a gain of 2.7 percent following the 3.5 percent contraction in the previous month.

The average of monthly income per household stood at 519,304 yen, down 2.2 percent on year.

Data from the Cabinet Office showed that the Japan's leading index improved further in November to the highest level in one-and-a-half years. The leading index, which measures future economic activity, rose to 110.5 in November from 109.8 in October.

Moreover, this was the highest reading since May 2024, when the reading was 111.1.

Meanwhile, the coincident index dropped to 115.2 in November from 115.9 a month ago. The coincident index measures the current economic situation.

In the Asian trading today, the yen fell to 2-day lows of 183.38 against the euro, 211.39 against the pound and 196.89 against the Swiss franc, from yesterday's closing quotes of 182.91, 210.83 and 196.35, respectively. If the yen extends its downtrend, it is likely to find support around 184.00 against the euro, 212.00 against the pound and 199.00 against the franc.

Against the Australia and the New Zealand dollars, the yen edged down to 105.40 and 90.39 from Thursday's closing quotes of 105.10 and 90.25, respectively. The yen may test support near 106.00 against the aussie and 91.00 against the kiwi.

Against the U.S. and the Canadian dollars, the yen slipped to nearly a 3-week low of 157.44 and a 3-day low of 113.53 from Thursday's closing quotes of 156.88 and 113.16, respectively. On the downside, 158.00 against the greenback and 115.00 against the loonie are seen as the next support levels for the yen.

Looking ahead, Canada jobs data for December, U.S. building permits for October, housing starts for September, average earnings data for December, U.S. University of Michigan's consumer sentiment for January and U.S> Baker Hughes oil rig count data are slated for release.

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