- The Japanese Yen (JPY) is extending losses
- PM Takaichi plans huge fiscal spending
- The US Dollar (USD) is rising against its major peers
- FOMC minutes show a divided committee
The US dollar Japanese yen (USD/JPY) exchange rate is rising for a third straight day. The pair rose 0.17% in the previous session, settling on Tuesday at 155.53. On Wednesday at 22.00 UTC, USD/JPY trades 1% at 157.20 and trades in a range of 155.22 to 157.18.
The yen extended its decline, falling to its lowest level in 10 months, after Finance Minister Katayama said Japan’s government was closely monitoring the financial market. Investors are clearly shrugging off this verbal warning. On prior occasions, verbal warnings from the government have preceded interventions in the foreign exchange market.
The yen has come under heavy pressure this week amid expectations that Prime Minister Takaichi’s new administration will unveil a large fiscal stimulus package supported by low interest rates.
Bond yields have surged after reports indicated the spending plan could exceed ¥20 trillion. Anytime yields rise and a currency falls, it suggests that global investors are losing confidence in the country’s overall situation.
The market has pushed back rate-hike expectations, with a December hike no longer the base case.
The US Dollar rose against the yen on Friday but was unchanged versus its major peers. The US Dollar Index, which measures the greenback against a basket of major currencies, is trading +0.01% at 99.59.
The US dollar is pushing higher after the minutes to the October Fed meeting showed that many officials thought it would be appropriate to keep interest rates unchanged for the rest of 2025. The meeting minutes also showed that several policymakers were against cutting rates at the October meeting.
The minutes highlighted the uncertainties surrounding the chances of a rate cut next month given ongoing divisions within the committee over whether inflation or unemployment represents a greater threat to the US economy.
Attention will now turn to tomorrow’s nonfarm payroll reports, although these are September’s numbers and are therefore quite backward-looking.