Yen's Struggle: BOJ Cautious as Dollar Strengthens

The yen nears a five-month low against the dollar amid contrasting monetary policies between the Federal Reserve and the Bank of Japan. While the BOJ remains cautious, the Fed's hawkish stance supports a strong dollar. Tokyo's inflation data indicates potential BOJ rate hikes, but uncertainties persist.

The yen hovered near a five-month low to the dollar on Friday, reflecting a stark contrast between the hawkish messaging of the U.S. Federal Reserve and the Bank of Japan's cautious stance on further policy tightening.

Trading at 157.725 per dollar as of 0030 GMT, the yen edged up 0.1% from Thursday but remained close to its weakest level since mid-July. The BOJ's December policy meeting summary, released Friday, indicated a divided outlook among officials about a near-term rate increase amidst uncertainties over wages and the incoming Trump administration's policies.

BOJ Governor Kazuo Ueda has emphasized the need for time to assess economic outlooks, especially regarding wages and overseas economies. In contrast, Fed Chair Jerome Powell maintained that the U.S. Federal Reserve will be cautious about further rate cuts, amidst Trump's anticipated economic measures, seen as pro-growth yet inflationary.

(With inputs from agencies.)