A slight deterioration in the global risk sentiment drives some haven flows towards the Japanese Yen amid intervention fears, though the Bank of Japan policy uncertainty might keep a lid on any further gains.
Japan's vice finance minister for international affairs, Masato Kanda, issued a fresh warning and said that the government stands ready to take appropriate action against excessive exchange-rate moves and volatility.
BoJ board member Hajime Takata said that achievement of the 2% inflation target is becoming within sight and that the central bank must consider taking a nimble and flexible approach towards an exit from ultra-loose monetary policy.
Slightly warmer consumer inflation in Japan fuelled speculations that the Bank of Japan will pivot away from its ultra-loose policy settings, though a recession could delay the central bank's plan to tighten its policy.
Official data released this Thursday showed that Japanese Retail Sales registered higher-than-expected growth of 2.3% over 12 months through January, while Industrial Production sank 7.5% during the reported month.
The second reading of the US GDP print published on Wednesday showed that the world's largest economy expanded by a 3.2% annualized pace during the fourth quarter vs the advance estimate of a 3.3% rise.
Nevertheless, the data suggested that the US economy remains in good shape, which, along with warnings from Federal Reserve officials, reiterating the higher-for-longer narrative, underpins the US Dollar.
New York Fed President John Williams said that the central bank is likely to begin cutting interest rates this year depending on how the data come in, though there is still a way to go before hitting the 2% inflation target.
Atlanta Fed President Raphael Bostic stressed that the US central bank has not declared victory over inflation yet and added that he is comfortable advising patience when it comes to loosening monetary policy.
Furthermore, Boston Fed Bank President Susan Collins noted that it will likely become appropriate to begin easing policy later this year but the path to returning inflation to its 2% target will likely continue to be bumpy.
This continues to act as a tailwind for the US Dollar and should lend some support to the USD/JPY pair ahead of the key US Personal Consumption Expenditures (PCE) Price Index – the Fed's preferred inflation gauge.
Thursday's US economic docket also features the release of the usual Weekly Initial Jobless Claims, the Chicago PMI and Pending Home Sales, which, along with Fed speak, might infuse some volatility in the markets.
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