Yen Set for Fourth Consecutive Weekly Decline

The Japanese yen weakened to around 158 per dollar on Friday, heading for a fourth consecutive weekly loss amid persistent pressure from the wide interest rate gap between the US and Japan, as relatively low domestic rates and the country’s substantial debt burden continued to weigh on the currency. Meanwhile, data showed that Japan’s personal spending fell for a ninth consecutive month in August, as consumers remained cautious amid persistent inflation. On the monetary policy front, BOJ board member Ayano Sato, who previously opposed the central bank’s September rate hike, said this week she favored a gradual approach to raising interest rates in several stages, reinforcing expectations of further policy tightening. Elsewhere, Prime Minister Sanae Takaichi continued to pursue expansionary fiscal policies despite concerns over the weak yen and elevated bond yields, pledging to cut the consumption tax on food.

The Japanese yen held steady around 158 per dollar on Thursday, remaining within a narrow range after data showed the country’s current account surplus increased to 4.062 trillion yen in August, surpassing forecasts of 3.194 trillion yen. However, the currency remained under pressure from the wide yield differential between the US and Japan, alongside relatively low domestic interest rates and Japan’s substantial debt burden. Prime Minister Sanae Takaichi also continued to pursue expansionary fiscal policies, pledging to reduce the consumption tax on food products while stressing that the government would secure funding without issuing additional bonds to reassure financial markets. Meanwhile, Bank of Japan member Ayano Sato, who previously opposed the central bank’s September rate hike, said this week that she supported a gradual approach to raising interest rates in multiple stages, reinforcing expectations that policymakers could raise rates again.

The Japanese yen weakened to around 158.5 per dollar on Wednesday, approaching two-week lows as the wide yield gap between the US and Japan continued to favor the dollar. The currency remained under pressure from relatively low domestic interest rates and Japan’s heavy debt burden, with Prime Minister Sanae Takaichi pushing ahead with expansionary fiscal policies. In a parliamentary address, Takaichi pledged to cut the consumption tax on food products while emphasizing that the government would secure funding without issuing additional bonds, seeking to reassure financial markets. Meanwhile, data showed that Japan’s real wages rose 1.5% year-on-year in August, marking the eighth consecutive month of gains and reinforcing expectations for further Bank of Japan interest rate hikes. BOJ member Ayano Sato also expressed support for raising interest rates gradually in several stages.