The Japanese yen consolidated as the Bank of Japan issued a restrictive statement that it is expected to withdraw its economic stimulus program as early as March. The yen rose on Wednesday after the Bank of Japan decided to keep stimulus measures in place, but Governor Kazuo Ueda hinted that negative interest rates could end in April or even March.

USD/JPY abruptly fell 0.16% to 147.84, overall rising from 146.99 to 148.70. At the Monetary policy meeting held yesterday, BoJ decided to extend its controversial yield curve control practice, setting the following guideline for market operations for the intermeeting period. The Bank will apply a negative interest rate of minus 0.1% to the Policy-Rate balances. At the same time, BoJ will keep purchasing a “necessary amount” of Japanese government bonds (JGBs) without setting an upper limit so that 10-year JGB yields will remain at around 0%.

Meanwhile, according to the earlier published stats, in 2023, Japan's trade deficit went down by more than half from the previous year to 9.29 trillion yen (approximately US$63 billion), as backed by weakening yen total exports had hit a record high. The country’s total exports increased by 2.8% to 100.89 trillion yen, exceeding 100 trillion yen for the first time, reaching the highest level since 1979. Imports fell 7% to 110.18 trillion yen, corresponding to a 7% decline due to lower oil and natural gas prices. Strong export growth has helped Japan reduce its trade deficit, while Japan has been hit by rising import costs and a weaker yen, further driving up import costs.