USD/JPY declines to near 146.00 on BoJ Ueda’s hawkish commentary on interest rates

• USD/JPY drops sharply to near 146.00 as BoJ Ueda delivers hawkish interest rate guidance.
• BoJ Ueda reiterated the need to raise interest rates further this year.
• The Fed is now more focused on controlling downside risks to the US labor market.

The USD/JPY pair falls sharply to near 146.00 in Tuesday’s North American session. The asset faces selling pressure as the Japanese Yen (JPY) strengthens after Bank of Japan (BoJ) Governor Kazuo Ueda’s hawkish commentary on interest rates.

Kazuo Ueda reiterated in a document submitted to a government panel on Tuesday that the central bank won’t hesitate to raise interest rates further if the economy and inflation perform as expected, Reuters reported. Inflationary pressures in the Japanese economy continue to remain stubborn. Tokyo Consumer Price Index (CPI), excluding Fresh Food, released on Thursday, rose at a faster pace to 2.4% in August from estimates and July’s release of 2.2%.

USD/JPY remains on the backfoot despite further upside in the US Dollar (USD). The US Dollar Index (DXY), which tracks the Greenback’s value against six major currencies, rises towards a two-week high of 102.00.

The US Dollar gains as investors turn cautious ahead of the United States (US) Nonfarm Payrolls (NFP) data for August, which will be published on Friday. Market participants will keenly focus on the official labor market data as the Federal Reserve (Fed) is now more focused on preventing labor demand, given that officials are confident about price pressures returning sustainably to the bank’s target of 2%.

In today’s session, investors will focus on the US ISM Manufacturing PMI data for August, which will be published at 14:00 GMT. Economists expect that activities in the manufacturing sector contracted at a slower pace, with the PMI coming in at 47.5 from July’s reading of 46.8.