After achieving impressive gains, the Japanese Yen (JPY) unexpectedly weakened in today's trading session, December 2, pushing the USD/JPY exchange rate pair above the 150.50 mark.
According to FXStreet, the main reason comes from the rise in US bond yields, as investors worry that President-elect Donald Trump's new tariff policies could increase consumer prices. This fuels expectations that the Fed will stop cutting interest rates, causing capital flows to shift away from the low-yielding JPY and back to the USD.
President-elect Donald Trump has threatened to impose a 100% tariff on BRICS countries (Brazil, Russia, India, China, South Africa) if they replace the US dollar with other currencies in international transactions. This, along with the threat of higher tariffs on Mexico, Canada and China, has raised concerns about a new global trade war.
Investors believe Trump’s policies could push up consumer prices, prompting the Fed to stop cutting rates or even raise them again. U.S. bond yields rose, the dollar rallied, and investors pulled money out of the lower-yielding yen.
However, the yen's depreciation may not last long due to expectations that the Bank of Japan (BoJ) will continue to raise interest rates in December.
In Japan, data showed consumer inflation in Tokyo picking up, bolstering the case for a December rate hike by the BoJ. BoJ Governor Kazuo Ueda also said further rate hikes were possible if the economy continued to recover. In addition, capital spending in Japan rose 8.1% in the third quarter, suggesting strong domestic demand is supporting the economy.
Investors are waiting for the US Non-Farm Payrolls (NFP) Report for more information on the Fed's interest rate policy direction.
According to Lao Dong, updated at 1:00 p.m. on December 2, the USD/JPY exchange rate is currently fluctuating around 150.609 USD/JPY, meaning 1 USD can be exchanged for about 150.5 JPY, up 0.6% compared to yesterday's session.
