The Yen declined on Friday after the Bank of Japan (BOJ) indicated it would be cautious about implementing further policy tightening.

The governor did not provide clear signals regarding a potential interest rate increase in the near future.

Meanwhile, the Dollar strengthened by 0.74%, reaching 143.65 Yen, near an overnight peak of 143.95, following Governor Kazuo Ueda's comments after the BOJ unanimously decided to maintain its overnight call rate target at 0.25%, as anticipated, Reuters reports.

“Our decision on monetary policy will depend on economic, price and financial developments at the time. Japan's real interest rates remain extremely low. If our economic and price forecasts are achieved, we will raise interest rates and adjust the degree of monetary support accordingly,” Ueda said during the post-meeting press conference.

“We had expected that Ueda would warm up to another rate hike,” stated Niels Christensen, chief analyst at Nordea Bank.

Whereas according to Shoki Omori, chief Japan desk strategist at Mizuho Securities, the Dollar's increase against the Yen showed relief that Governor Ueda did not really address interest rate policy during his speech.

“It seems like he focused on economic data and tried to avoid answering market comments. He was hiding his hawkishness,” Omori said, going on to add that the greenback’s rise against the Yen was probably temporary. 

Markets were processing Friday's data on Japanese consumer prices, which revealed that core inflation rose to 2.8% in August, while overall inflation reached 3.0%. 

It has been a challenging week for the Yen, as the Euro climbed 2.8% to 160.35, with speculators taking profits on their recent long Yen positions.

The Euro also strengthened to $1.1154, rising 0.7% against the Dollar for the week and nearing the August peak of $1.1201. A breakout above that level could aim for the July 2023 high of $1.1275.

In addition, Sterling also made gains on Friday following the Bank of England’s decision to keep rates unchanged on Thursday, while its governor said it had to be “careful not to cut too fast or by too much.”

The Pound rose 1.34% for the week so far at $1.3301, bolstered by Friday's strong retail sales figures, having hit its highest since March 2022.