Oral "attack" from the Minister of Finance
The foreign exchange market closed last week with the USD/JPY exchange rate anchored at 156.18, down slightly by 0.08% in the weekend session (November 29). However, looking at the technical chart, this is just a temporary break in the long-term uptrend when the Yen has depreciated by up to 1.33% in just the past month. This persistent weakness has forced the Japanese Ministry of Finance to issue the strongest signals.
The market focused on the speech on Sunday morning (November 30) by the new Japanese Finance Minister, Ms. Satsuki Katayama. Appearing on Fuji TV, Ms. Katayama affirmed that the current rapid decline of the Yen is "clearly not based on fundamental factors".
A senior official's direct names of these fluctuations as "uchiefs" and a repeat mention of the possibility of foreign exchange intervention shows that the 156.00 - 157.00 price range is the "red line" that the Japanese government wants to protect. The USD/JPY exchange rate is rising, inflationary import pressure on the Japanese economy is getting stronger, forcing authorities to consider selling USD to buy back JPY.
Reversal view from JPMorgan
In contrast to the Japanese government's reassuring efforts, major financial institutions are viewing the currency's internal strength more pessimistically.
JPMorgan has just adjusted its exchange rate forecast, causing shock to long-term investors. The bank now believes that the USD/JPY exchange rate will remain at a high of 150 from 2026 onwards, instead of 139 as previously forecast. This means that the "cheap Yen" era will last longer than expected.
This change of view is clearly reflected in JPMorgan's upgrading of shares of Sumitomo Mitsui Financial Group (SMFG). They believe that the current interest rate and exchange rate environment will benefit the profits of Japanese banks, despite the weakening of the domestic currency.
The future of the Yen
Currently, the JPY/USD exchange rate is fluctuating at an extremely low level, equivalent to 0.0064 USD for 1 Yen. The recovery of this currency is "weighing the bar" and depends entirely on the speech of Governor of the Bank of Japan (BOJ) Kazuo Ueda on Monday.
The market is holding its breath waiting for a signal about raising interest rates at the December meeting.
If Ueda shows signs of being "Havy", the Yen could rebound, pulling USD/JPY away from the156 danger zone.
If the "Pubs" continue, the huge $117 billion economic stimulus package that Prime Minister Sanae Takaichi has just approved vonised by issuing new debt will be a "dose of poison to continue to sink the Yen, despite all warnings of intervention.
