2025-11-09 22:42:00
The recent optimism for a yen rebound is fading fast as major banks downgrade their forecasts and investors scale back expectations for an early Bank of Japan rate hike, with fiscal concerns under Prime Minister Sanae Takaichi adding fresh downward pressure on the currency.
Japanese media, the Nikkei, runs the report this morning, Tokyo time. In brief:
- JPMorgan Chase cut its year-end forecast for the yen to 156 per dollar from 142, and now sees 152 by March 2026 instead of 139.
- MUFG Bank and Sumitomo Mitsui Banking Corp. made similar downward revisions, signalling broad skepticism that the BOJ will tighten policy anytime soon.
At its most recent meeting, the BOJ left interest rates unchanged
- Governor Kazuo Ueda said the bank needed more time and data before deciding on rate hikes, prompting traders to interpret his stance as cautious.
- “It’s not a stage to proactively buy yen,” said Hirofumi Suzuki, chief FX strategist at SMBC, adding that there was “no groundwork” for an early move.
- Market pricing implies only a 57% chance of a rate hike in December.
- Analysts note that monetary policy expectations have become less influential than politics and fiscal signals.
Concerns are growing over Takaichi’s plans for “responsible and proactive” fiscal spending, with investors wary that a large supplementary budget could further weaken the yen.
MUFG’s Teppei Ino said the market will likely remain under selling pressure until the scale of the new stimulus is revealed. The government is expected to finalise its extra budget later this month.
Adding to the uncertainty, new members appointed to the Economic and Fiscal Policy Council come from Japan’s reflationist camp, reinforcing the view that Tokyo may tolerate a weaker currency.
JPMorgan’s Junya Tanase noted that “the selling reaction to Takaichi’s policies has been stronger than expected.”
While some strategists, including Citigroup’s Osamu Takashima, expect eventual yen buying as part of profit-taking in Japanese equities, most see limited support in the near term.
Markets are now watching an upcoming speech by BOJ policy board member Junko Nakagawa on November 10 for fresh clues on the central bank’s policy path.
