The Japanese Yen is currently experiencing sideways consolidation, influenced by conflicting factors. Fiscal concerns arising from proposed tax cuts are weighing on the currency, while expectations of potential intervention by Japanese authorities and prospects of further BOJ policy tightening offer support. Traders are awaiting the outcome of the upcoming Bank of Japan meeting for clearer signals regarding the future trajectory of the Yen.
- Prime Minister Sanae Takaichi’s proposal to cut the sales tax on food has raised concerns about Japan’s fiscal outlook.
- Takaichi announced plans to hold a snap election in February.
- The Bank of Japan is expected to maintain the status quo on interest rates at its upcoming meeting.
- Traders are alert to potential Yen intervention amid worries about the impact of a weaker currency on domestic inflation.
- Japan’s Finance Minister hinted at the possibility of joint intervention with the US to deal with the recent Yen weakness.
- Some BOJ policymakers see scope to raise rates sooner than markets expect, possibly in April.
- A Bank of Japan survey showed that most Japanese households expect prices to keep rising for the next few years.
- Renewed trade war fears have revived the ‘Sell America’ trade, weighing on the US Dollar and impacting the USD/JPY pair.
The information suggests a period of uncertainty for the Japanese Yen. Government policy decisions and fiscal stability are acting as headwinds. Countering this are the potential for intervention and possible future tightening by the central bank. The Yen’s future performance hinges on how these competing forces play out and the signals that emerge from the upcoming central bank meeting.