The Japanese yen rose in Asian trading on Friday against a basket of major and minor currencies, attempting to recover from an eight-month low versus the US dollar recorded earlier in the session, as traders engaged in moderate buying from depressed levels.
Still, the yen remains on track for its biggest weekly loss in a year, pressured by expectations that Sanae Takaichi — poised to become Japan’s first female prime minister — will favor expansionary fiscal and monetary policies.
Price Overview
• USD/JPY rate today: The dollar slipped 0.25% to ¥152.64 from an opening level of ¥153.04, after touching a high of ¥153.27 — its strongest since February.
• The yen closed Thursday down 0.25% versus the dollar, marking a sixth straight daily loss amid ongoing political-driven selling pressure.
Weekly Performance
So far this week, the yen has fallen about 3.5% against the US dollar, heading for its third weekly loss in a month and its steepest since September 2024.
Political Pressure from Takaichi
The yen came under heavy pressure at the start of the week following Sanae Takaichi’s election as leader of Japan’s ruling Liberal Democratic Party, paving the way for her to become the country’s first female prime minister.
Her victory reinforced expectations that the incoming government will boost public spending and maintain loose monetary policy — factors weighing on the currency.
In her post-election press conference, Takaichi said the government and the Bank of Japan should work closely to achieve demand-driven inflation supported by rising wages and corporate profits.
Analyst Commentary
• Carol Kong, currency strategist at Commonwealth Bank of Australia in Sydney, said the USD/JPY’s rise has been “almost uninterrupted,” adding that only profit-taking could pause the uptrend.
• Kong added that confirmation of Takaichi’s appointment and the upcoming Bank of Japan meeting in October could be the next catalysts for further yen weakness, especially if she reaffirms her dovish stance and the BOJ signals no near-term rate hikes.
• Karl Schamotta, chief market strategist at Corpay in Toronto, noted that traders are increasingly skeptical about Takaichi’s ability to push through fiscal stimulus while resisting BOJ tightening plans.
• Schamotta added: “This reflects Japan’s underlying inflation dynamics — households are demanding change as inflation remains high.”
Japanese Interest Rates
• Following Takaichi’s victory, market pricing for a 25-basis-point BOJ rate hike in October fell from 60% to 25%.
• Yen swap markets now assign a 41% chance of a rate increase by December, down from 68% before the party election.
The 160 Yen Threshold
Atsushi Takeuchi, a former Bank of Japan official who participated in Tokyo’s market operations a decade ago, told Reuters that authorities may tolerate moderate yen weakness but could intervene if the currency plunges sharply toward ¥160 per dollar.
“Officials won’t mind if the yen’s decline remains gradual,” Takeuchi said. “Alarm bells will ring if traders start talking about a sharp fall toward 160 or 170 yen per dollar.”
He added, “If the yen drops that far, authorities can — and should — intervene. While intervention can’t change the broader market trend, it can slow or halt excessive declines in the yen.”
