The Japanese yen weakened past 152 per U.S. dollar on Friday, sliding 1.4% on the day to its weakest level since early February, after the Bank of Japan unexpectedly held its policy rate steady at 0.50% and Governor Kazuo Ueda walked back hawkish messaging delivered earlier this month. The decision blindsided currency markets that had priced in a 65% probability of a 25-basis-point hike.
The yen's decline came in heavy volume across Asian and European trading hours, with USD/JPY rising as high as 152.84 before settling near 152.40. The Nikkei 225 closed up 1.9% at 41,847 as the weaker currency boosted exporter earnings prospects. Auto stocks led the rally with Toyota gaining 3.4%, Honda 2.8%, and Nissan 4.2%.
Ueda Cites Iran-Driven Uncertainty
In his post-meeting press conference, Governor Ueda cited "unusually elevated" external uncertainty stemming from the Iran ceasefire negotiations, lingering questions about Strait of Hormuz reopening, and the potential impact on imported energy costs. The BOJ chief said the Policy Board judged it premature to act before observing several months of post-conflict data, particularly given the still-elevated 3.4% headline inflation reading.
The pivot represents a notable retreat from Ueda's April 8 testimony to the Diet, in which he had explicitly warned that "underlying inflation has reached a level requiring further normalization." Several BOJ-watchers suggested that Ministry of Finance pressure to slow the pace of yen appreciation — which had reached a multi-year high near 138 in early April — may have factored into the dovish pivot.
Carry Trade Returns
The yen-funded carry trade, which had partially unwound during the early 2026 BOJ tightening cycle, is showing signs of resurgence. CFTC data through Tuesday showed speculators rebuilt net short yen positions to 38,000 contracts, the largest short positioning since the August 2024 unwind. Goldman Sachs FX strategist Kamakshya Trivedi forecasts USD/JPY to test 156 over the coming weeks if the BOJ remains on hold through the June meeting.