The yen weakened slightly on Friday, with the USD/JPY pair rising nearly 0.2%

Most Asian currencies rose slightly on Friday, while the yen lagged after the Bank of Japan kept interest rates steady and hiked its economic forecasts.

The yen weakened slightly on Friday, with the USD/JPY pair rising nearly 0.2% after the BOJ left its benchmark interest rate unchanged at 0.75% in a nearly unanimous decision.

The central bank also slightly hiked its outlook for inflation and economic growth in fiscal 2025 and 2026, citing expectations for more support from government spending.

But the yen took little support from this move, given that concerns over Japan’s stretched fiscal burden were a major weight on the yen. Japanese government bonds were sold off sharply this week on bets of more fiscal stress under Prime Minister Sanae Takaichi, who declared a snap election in early-February.

The yen was also pressured by consumer price index data showing headline Japanese inflation fell to its lowest level since early-2022. Underlying inflation, however, remained above the BOJ’s 2% annual target.

Focus is now on a post-meeting address by BOJ Governor Kazuo Ueda, due later on Friday, for more cues on the central bank’s outlook. The BOJ, in its monetary policy statement, largely reiterated its stance that interest rates will increase as inflation and growth improve in line with its forecasts.

Barring the yen, most Asian currencies rose on Friday on weakness in the dollar.

The yuan’s USD/CNY pair dropped 0.1% and remained close to its strongest level since mid-2023. The People’s Bank on Friday set its daily yuan midpoint at below 7 yuan for the first time since 2023, signalling strong support for the Chinese currency.

The Australian dollar’s AUD/USD pair advanced slightly, while the Singapore dollar’s USD/SGD and the Taiwan dollar’s USD/TWD dropped 0.1% apiece.

The won’s USD/KRW pair lagged, adding 0.2%, while the Indian rupee’s USD/INR pair remained pinned above 91 rupees.