The USD/JPY pair continued its upward trajectory for the fifth consecutive session on Thursday, hovering near 152.50 during Asian trading hours. The pair’s strength reflects growing weakness in the Japanese yen (JPY), as traders increasingly expect Japan’s new Prime Minister Sanae Takaichi to maintain expansionary fiscal measures and support the Bank of Japan’s (BoJ) accommodative monetary policy stance.
Market participants are widely betting that the BoJ will keep interest rates unchanged at its policy meeting next week, while expectations are building for a potential rate hike in January.
Reports suggest that Prime Minister Takaichi could unveil a large-scale fiscal stimulus package as early as next month. Early indications point to a plan potentially exceeding JPY 13.9 trillion, surpassing last year’s initiative aimed at easing inflationary pressures on households.
The pair also finds additional support from renewed optimism surrounding U.S.-China trade relations. U.S. President Donald Trump stated late Wednesday that he expects to reach multiple agreements with Chinese President Xi Jinping during their meeting in South Korea next week. Discussions are expected to cover a broad range of topics, including U.S. soybean exports, nuclear arms control, and China’s purchases of Russian oil.
However, upside momentum for USD/JPY may remain limited as the U.S. Dollar (USD) faces potential headwinds from the ongoing U.S. government shutdown. The political deadlock has delayed key economic data releases including Nonfarm Payrolls (NFP) adding uncertainty to financial markets and complicating the Federal Reserve’s (Fed) policy outlook.
According to the CME FedWatch Tool, markets are now pricing in a 97% probability of a rate cut in October, with a 96% chance of another reduction in December.
