"The Japanese Yen continues to weaken, reflecting the policy divergence between the Bank of Japan (BoJ) and other major central banks. Following its latest meeting, the BoJ kept its policy rate unchanged at 0.5%. Although Governor Kazuo Ueda signalled that the bank is "ready to adjust" policy if wage growth and inflation continue to rise sustainably, recent data have not been strong enough to justify an immediate change."
"The trade balance remains in deficit or near-balance territory. These factors suggest the BoJ is likely to maintain its ultra-loose stance - continuing to put downward pressure on the Yen. However, medium-term reversal risks are gradually emerging. Japan's core CPI (excluding fresh food) remains around 2.7% y/y (as of August 2025) - above the BoJ's 2% target and has stayed above that level for over three years."
"After the FOMC meeting last night, the Federal Reserve cut rates by 25 bps, bringing the target range down to 3.75-4.00%. However, Chair Jerome Powell emphasized that this does not mark the beginning of an aggressive easing cycle and that the Fed will remain "data-dependent." Powell also noted that another cut in December should not be assumed. Despite the rate reduction, the U.S.-Japan yield spread (TNX around 4.0%-4.1%) remains wide, continuing to support the USD against the JPY."
The Japanese Yen is weakening due to policy divergence between the Bank of Japan and other major central banks. The BoJ held its policy rate at 0.5% and signalled readiness to adjust only if wage growth and inflation rise sustainably, with recent data insufficient for immediate change. Q2 2025 GDP grew 0.5% q/q, but domestic consumption remains weak and exports have stagnated, leaving the trade balance near deficit. Core CPI excluding fresh food is around 2.7% y/y and has exceeded the BoJ's 2% target for over three years, increasing the probability of a rate hike within 6-12 months. The Federal Reserve cut rates by 25 bps to 3.75-4.00% but remains data-dependent, keeping the U.S.-Japan yield spread wide and supporting the USD against the JPY.
Read at London Business News | Londonlovesbusiness.com
Unable to calculate read time
Collection
[
|
...
]