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On [Month] [Day], the latest data released by the Cabinet Office of Japan showed that the country's Gross Domestic Product (GDP) grew at an annualized rate of .% in the fourth quarter of the year, significantly higher than the market's previous expectation of .%. The unexpected growth of the Japanese economy has heightened market expectations for a rate hike by the Bank of Japan, leading to a rise in the yen. On that day, the USD/JPY exchange rate successively broke through the and levels, at one point falling to around USD/JPY.

Analysts from the Meiji Yasuda Research Institute in Japan stated that the Japanese economy is growing, which suggests that the Bank of Japan may continue to gradually increase interest rates in a step-by-step manner. "Strong data supports the Bank of Japan's gradual interest rate hikes, and it is expected that the Bank of Japan will raise the interest rate to .% within this year." The significant interest rate differential between the United States and Japan has long been a major reason for the depreciation of the yen. Since restarting the interest rate hike cycle in a certain month and year, the Bank of Japan has implemented three interest rate increases in less than a year. In a certain month and year, the Bank of Japan ended the negative interest rate policy that had been maintained for several years, raising the interest rate from negative .% to a range of .% to .%, and again raised interest rates at the monetary policy meeting in a certain month and year. In a certain month and year, the Bank of Japan increased the interest rate from .% to .%.

Regarding the future trend of the yen, opinions vary among several institutions. With the Federal Reserve's interest rate cuts and the Bank of Japan's potential rate hikes on the horizon, some institutions believe that the interest rate differential between Japan and the U.S. may narrow to less than %, providing some support for the yen's appreciation. Analysts from Mizuho Securities in Japan suggest that Japan's policy rate could rise above % faster than expected, which would restrain the widening of the Japan-U.S. interest rate differential and potentially lead to a continued upward trend in the yen's exchange rate against the dollar. However, other institutions hold different views. Commerzbank stated in a report released on a certain day that Japan's stronger-than-expected economic data for the fourth quarter of the year might prompt the Bank of Japan to further increase interest rates this summer. However, the expectation of rate hikes offers limited room for further support for the yen, and it is anticipated that the yen will not appreciate significantly.

Text/Zhang Bo

Editor/Sun Nan

Reviewed by Zhang Yumei

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