FX.co ★ Yen Strengthens on GDP Beat and BOJ Speculation

The Japanese yen strengthened towards 147 per dollar on Friday, recovering the losses from the previous session, buoyed by stronger-than-expected GDP figures and mounting expectations for an interest rate increase by the Bank of Japan. In the second quarter, Japan's economy expanded by 0.3%, a notable improvement from the 0.1% recorded in the first quarter and surpassing the consensus forecast. This growth was largely attributed to net exports, which added 0.3 percentage points to the economic expansion despite facing challenges from US tariffs. Additionally, the yen received a boost following remarks from US Treasury Secretary Scott Bessent, who criticized the Bank of Japan for lagging in its efforts to combat inflation. The central bank is also under scrutiny to discard an inflation measure that is closely linked to domestic demand and wage growth, which has previously limited its ability to tighten monetary policy. Nevertheless, Bank of Japan Governor Kazuo Ueda has maintained a cautious stance, emphasizing that "underlying inflation" is still below the targeted 2%.