The Bank of Japan's interest rate hike stance is cautious, with the yen hovering near a five-month low

According to Zhitong Finance APP, the Japanese yen hovered near a five-month low against the US dollar on Friday, contrasting sharply with the Federal Reserve's hawkish remarks and the Bank of Japan's cautious stance on further tightening policies.

As of the time of writing, the USD/JPY exchange rate was 157.62, close to the day's low of 158.09, the lowest level since July 17.

The summary of opinions from the Bank of Japan's December policy meeting released on Friday showed that some officials were becoming more confident about recent interest rate hikes, while others remained cautious about wage trends and the uncertainties surrounding the policies of the Donald Trump administration. Similarly, the Japanese inflation data for December released on Friday supported further rate hikes.

Bank of Japan Governor Kazuo Ueda stated last week that after the central bank kept interest rates unchanged, it would take "considerable time" to comprehensively assess wage and overseas economic prospects, especially in the United States.

In contrast, Federal Reserve Chairman Jerome Powell stated earlier this month that Fed officials would "exercise caution regarding further rate cuts," following the Fed's expected 25 basis point rate cut.

Economists believe that Trump's proposed deregulation, tax cuts, increased tariffs, and tightened immigration policies are beneficial for both economic growth and inflation.

The USD/JPY is expected to appreciate by 5.4% this month and by 11.9% year-to-date.

Mizuho Securities analysts Masafumi Yamamoto and Masayoshi Mihara wrote in a client report: "The upward trend is strong, but the market feels that the current strong dollar/weak yen trend is somewhat overstretched, with a risk of a pullback." "Japanese officials may also issue stronger intervention warnings."

On December 20, Japan's Finance Minister and top foreign exchange diplomat expressed shock at the "excessive" fluctuations in the exchange rate during a media briefing and indicated readiness to take "appropriate action."

The US dollar index, which measures the dollar against the yen, euro, pound, and three other major currencies, held steady at 108.09, hovering around that level throughout the week. For the month, the index rose by 2.2%. Many traders are on holiday around Christmas and New Year.

As of the time of writing, the EUR/USD exchange rate was flat at 1.0412, down 1.6% so far in December. The GBP/USD showed little change on the day at 1.2526, down 1.7% for the month.

The leading cryptocurrency Bitcoin stabilized at $96,379, down 1.2% for the month, but reached a historical high of $108,379 on December 17. Year-to-date, the index has surged by approximately 125%