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Don’t dare to hoard Japanese yen? The continued depreciation of the yen may be just a perfect trap
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Hello everyone, today XM Forex will bring you "[XM Foreign Exchange Market www.xmserving.commentary]: Don't dare to hoard Japanese yen? The continued depreciation of the Japanese yen may be just a perfect trap." Hope this helps you! The original content is as follows:
XM Foreign Exchange APP News - On Thursday (November 6) during the Asia-Europe period, the U.S. dollar fluctuated slightly against the yen, currently down 0.1% and trading around 153.95. The exchange rate made a sharp bottoming out on Wednesday and then accelerated and stretched in late trading, once reaching a 9-month high. The U.S. dollar against the yen fell 0.5% against the Japanese yen on Tuesday due to another verbal warning from Satsuki Yamama, a Japanese finance minister. The U.S. dollar fell 0.5% against the yen despite the rise in the U.S. dollar index. On Wednesday, the exchange rate extended its decline in early trading and quickly rebounded and then turned red. Later in the day, the Bank of Japan hoped to see wage growth momentum before raising interest rates. However, the 1.4% year-on-year decline in September wage income released today may not meet the target. With the political buffer space that can wait, a December interest rate hike is by no means a certainty. In September, Japan's real wages fell year-on-year for the ninth consecutive month. Ueda and Oyuki made it clear that they hope to see clear growth momentum in the early stages of wage negotiations in the spring of 2026. This statement shows that the Bank of Japan is not in a hurry to act, implying that it will need to wait until the first quarter of next year before the central bank can make a definitive assessment. Ueda's cautious stance is reasonable - the annual substantial wage increase agreements reached by unions in the past two years have yet to have a transmission effect in the wider economy. In an inflationary environment, Japanese wages continue to weaken, causing the market to question whether the Bank of Japan can generate sustainable demand-driven inflationary pressure. The upcoming speeches of Ueda and the male governor may become a key variable, especially after Tokyo's CPI unexpectedly rose last month. However, with political leaders calling for cautious policy and weak wage growth, the Bank of Japan has no immediate pressure to raise interest rates even if inflation continues to deviate from its target. However, the Bank of Japan issued a special announcement last week, announcingKazuo Ueda will give a speech on December 1, which is only a few days away from the next Tokyo CPI report. This arrangement deserves special attention. At the same time, interest rates in Japan's real wages fell again in September, falling year-on-year for the ninth consecutive month. The core is that inflation growth continues to outperform wage growth. Although nominal cash income increased by 1.9% year-on-year, real wages adjusted for inflation fell by 1.4%, highlighting the pressure on household purchasing power. Consumption is the core pillar of the Japanese economy, and the continued shrinkage of real income is still the main constraint for the Bank of Japan to achieve demand-driven inflation. This time window may provide the central bank with room to operate, which can be used to warm up the market for potential policy adjustments in December, especially after the core and overall inflation data in the last Tokyo CPI report showed a sharply higher than expected rise. Judging from the current market pricing, the swap market implies a 50% probability that the Bank of Japan will raise interest rates by 25 basis points at its December 19 meeting. In fact, the outcome is regarded as a half-win game. By March next year, when the spring salary negotiations are fully advanced, the market has basically fully digested the expectation of a www.xmserving.complete interest rate hike. The risk of foreign exchange market intervention remains controllable. Although Ueda's speech will be a key follow-up event, Prime Minister Sanae Takaichi's statement this week further strengthened the market perception that "the pressure for policy action by the Bank of Japan will be moderate." Finance Minister Satsuki Katayama reiterated on Tuesday that the government would closely monitor currency market fluctuations with a high sense of urgency as the yen fell to an eight-month low near 154.50 per dollar. His latest statement is highly consistent with his remarks last Friday, indicating that Tokyo's verbal warning may be the ultimate measure for now. But Takaichi Sanae made clear that Japan is only halfway toward achieving sustainable inflation supported by wage growth, a signal that it does not want to push the central bank to tighten policy prematurely. This stance is consistent with her image as a "policy dove following the style of former Prime Minister Shinzo Abe", suggesting that although inflation is significantly higher than the Bank of Japan's 2% policy target, she is unwilling to risk weakening economic growth or pushing the yen to excessive strength. His dovish stance limits the credibility of the Finance Minister's warning about the trend of the yen - after all, USD/JPY has always been a typical interest rate-driven trading variety. Unless there is fundamental support - whether it is the Bank of Japan turning hawkish and pushing up local bond yields, or U.S. Treasury yields showing a substantial decline - any foreign exchange intervention measures required by the government to take place in the Bank of Japan are likely to have little effect. At present, the U.S. dollar against the yen is still on the upper track of the upward channel, but the decline in the U.S. dollar against the yen on Tuesday despite the rise in the U.S. dollar index has left a profound impact on the market, which means that the market's enthusiasm for shorting the yen has significantly decreased, and at the same time, some funds have begun to buy long yen on dips. At present, the exchange rate is still supported by the upper track of the channel and continues to close above the downward trend line. However, in the face of the possibility that the US dollar will reach a stage high in the near future, and as the Japanese yen interest rate hike progresses, the risk of adjustment of the US dollar against the yen is increasing day by day, and the possibility of this being the top area is also increasing. (Daily chart of USD/JPY, source: Yihuitong) At 16:00 Beijing time, USD/JPY is currently trading at 153.76/77.
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