Yen weakness continues amid policy makers’ softer tone – London Business News | Londonlovesbusiness.com

The Japanese yen could come under pressure since the new prime minister indicated that Japan is unprepared for further interest rate hikes following discussions with the central bank governor.

This statement reaffirmed Japan’s dovish monetary policy and could weigh on the yen. A decline could also be supported by data showing better-than-expected labor market conditions in the United States.

Additionally, Bank of Japan policymaker Asahi Noguchi, who opposed a rate hike earlier this year, reiterated the need for patience in normalizing policy, further weighing on the yen.

As Japan maintains its accommodative monetary policy, the gap between low interest rates in Japan and higher rates set by other central banks worldwide continues to weigh on the yen. This disparity weakens the yen’s value, leading to a more bearish outlook. It also impacts bond yields by keeping them anchored at low levels, reducing the appeal of Japanese debt for investors seeking higher returns elsewhere.

Consequently, the bearish sentiment surrounding the yen and the stagnation of Japanese bond yields create an environment that discourages investment in both the currency and government bonds.