empty
08.11.2024 10:56 AM
Chances for Another Wave of Yen Strength Are Becoming Increasingly Slim

A deep-seated fear of a return to prolonged deflation looms within Japanese society—a challenge that both the government and the Bank of Japan have struggled to overcome for decades. The idea of postponing a rate hike by the BOJ until at least the spring of next year is gaining traction. Recent proponents of this pause include BOJ board member Adachi, Yuichiro Tamaki (leader of the increasingly popular Democratic Party for the People, which quadrupled its representation in the lower house elections on October 27), and other influential figures.

This image is no longer relevant

The reasoning is straightforward: wage increases in the spring of 2024 were a significant factor in the BOJ's decision to begin exiting its negative interest rate policy. However, there's no guarantee that similar wage growth will occur in the spring of 2025. Observers argue that waiting for the outcome is prudent before considering another rate hike. This year's wage growth has been the highest since 1997, yet real household incomes continue to fall due to high inflation—declining by 1.9% year-over-year in August. Raising rates amid falling real incomes could severely impact consumption, GDP, and overall spending, potentially ushering in deflation—or worse, stagflation, a nightmare scenario for any government.

Such an approach is unlikely to support yen appreciation, especially as the Federal Reserve's policy recalibration gains attention following Trump's victory. Yesterday, the FOMC predictably cut rates by a quarter point, and futures now project only four additional cuts through the end of 2025, bringing the rate to 4%. This indicates a strong dollar, aligning with Trump's campaign rhetoric favoring a robust U.S. currency, which signals higher yields.

The markets will likely remain volatile in the near term, with headline-making announcements and personnel changes adding to the turbulence. However, the yen's prospects look weak. The factors that fueled its remarkable strength from July to September are no longer in play.

The yen maintained a bullish bias for just 11 weeks. As of the latest reporting period, this phase has ended, with a weekly change of -$3.1 billion, leading to a net short position of $2.0 billion. The yen and the euro are now competing in terms of sell-off momentum, with both currencies currently appearing weak against the dollar.

This image is no longer relevant

Last week, we anticipated sustained yen depreciation, which materialized. Following the announcement of the U.S. presidential election results, USD/JPY surged to 154.71, with only a shallow pullback afterward. Realistically, few reasons exist to expect a reversal in the yen's trajectory. The likely scenario is continued growth toward the multi-year high 161.79, set in July. The only potential obstacle to this upward trend would be an unexpected surge in demand for safe-haven assets—an unlikely scenario in the current environment.

Kuvat Raharjo,
Analytical expert of InstaForex
© 2007-2025
Select timeframe
5
min
15
min
30
min
1
hour
4
hours
1
day
1
week
Earn on cryptocurrency rate changes with InstaForex
Download MetaTrader 4 and open your first trade
  • Grand Choice
    Contest by
    InstaForex
    InstaForex always strives to help you
    fulfill your biggest dreams.
    JOIN CONTEST

Recommended Stories

Gold Rebounds as Fiscal Risks Resurface

Gold is swinging between extremes as spring draws to a close. The week ending May 16 was the worst for the precious metal due to optimism that, following a trade

Marek Petkovich 17:31 2025-05-23 UTC+2

AUD/JPY. Analysis and Forecast

Today, the AUD/JPY pair has started to attract buying interest, halting its pullback from the monthly high as demand for the Australian dollar emerges. Today's talks between U.S. Deputy Secretary

Irina Yanina 17:25 2025-05-23 UTC+2

USD/CAD. Analysis and Forecast

The pair is trending lower, dropping close to the key psychological level of 1.3800 amid broad-based U.S. dollar weakness. Traders have raised their expectations for Federal Reserve rate cuts following

Irina Yanina 16:43 2025-05-23 UTC+2

USD declares war on EUR

What's new is often just what's been forgotten. As spring draws to a close, the long-dismissed mantra "sell America" is making a comeback in markets. The phrase gained traction following

Marek Petkovich 14:59 2025-05-23 UTC+2

USD/JPY: what happens with yen?

The USD/JPY pair is experiencing heightened price turbulence. At the end of April, the pair sharply declined, hitting a 7-month low at 139.90. Then, last week, a northbound impulse pushed

Irina Manzenko 13:52 2025-05-23 UTC+2

Market Chaos to Continue (There is a likelihood of continued local declines in #USDX and gold prices)

Markets continue to act blindly amid the chaotic actions of Donald Trump, who is trying to pull the U.S. out of a deep, all-encompassing crisis like Baron Munchausen pulling himself

Pati Gani 10:19 2025-05-23 UTC+2

The Market Tucks Its Tail

A necessary project at the wrong time. The House of Representatives has approved Donald Trump's tax cut initiative. The President hopes it will help stimulate the economy and offset shortcomings

Marek Petkovich 09:29 2025-05-23 UTC+2

GBP/USD Overview – May 23: No Talks, but Hang in There

On Thursday, the GBP/USD currency pair traded relatively calmly, but like EUR/USD, it has been rising for two weeks. At first glance, one might wonder what reasons traders have

Paolo Greco 08:15 2025-05-23 UTC+2

EUR/USD Overview – May 23: The Rebellion Against the Dollar Continues

The EUR/USD currency pair traded relatively calmly on Thursday, yet it has risen significantly over the past two weeks. This movement can be interpreted in several ways. From a technical

Paolo Greco 08:15 2025-05-23 UTC+2

What to Pay Attention to on May 23? A Breakdown of Fundamental Events for Beginners

Very few macroeconomic reports are scheduled for Friday. Only two are noteworthy: the final estimate of Germany's Q1 GDP and April's UK retail sales data. The German GDP report

Paolo Greco 05:58 2025-05-23 UTC+2
Can't speak right now?
Ask your question in the chat.
Widget callback
 

Dear visitor,

Your IP address shows that you are currently located in the USA. If you are a resident of the United States, you are prohibited from using the services of InstaFintech Group including online trading, online transfers, deposit/withdrawal of funds, etc.

If you think you are seeing this message by mistake and your location is not the US, kindly proceed to the website. Otherwise, you must leave the website in order to comply with government restrictions.

Why does your IP address show your location as the USA?

  • - you are using a VPN provided by a hosting company based in the United States;
  • - your IP does not have proper WHOIS records;
  • - an error occurred in the WHOIS geolocation database.

Please confirm whether you are a US resident or not by clicking the relevant button below. If you choose the wrong option, being a US resident, you will not be able to open an account with InstaForex anyway.

We are sorry for any inconvenience caused by this message.