Bank of Japan's Delay in Raising Interest Rates Increases Pressure on Yen
During Wednesday's Asian trading session, the USD/JPY pair remained above the 154 level, nearing a nine-month high. Although some Bank of Japan committee members hinted at a shift in policy soon, the market widely expects the central bank to maintain its ultra-loose policy until the end of the year to avoid hindering the fragile economic recovery.
Analysts in Tokyo noted that the Japanese government is preparing a new fiscal stimulus plan focused on expanding infrastructure and energy subsidies, making it more difficult to tighten monetary policy in sync. Economist Takuji Aida commented that the Bank of Japan might wait for more economic data to confirm growth momentum before assessing the window for raising interest rates, stating, "Hasty actions could lead to increased market volatility, weakening the foundation for recovery."
Japan's GDP for the third quarter is expected to show a slight contraction, with private consumption and exports both appearing weak. The market speculates that the Bank of Japan may hold off until the first quarter of next year, continuing the current negative interest rate and yield curve control (YCC) framework.
U.S. Government Shutdown Crisis Resolution Weakens Safe-Haven Demand
Meanwhile, positive developments in the United States further pressured the yen's safe-haven appeal. The U.S. Congress passed legislation to restart government operations, ending a fiscal shutdown lasting over 40 days. As a result, global risk assets generally rebounded, with U.S. stock futures and emerging market currencies rising.
Wall Street analysts pointed out that with reduced fiscal uncertainty, investor risk appetite increased, leading to short-term selling pressure on safe-haven assets such as the yen and gold. Goldman Sachs' strategy team estimates that the government shutdown may have cost U.S. quarterly GDP growth between 1.5% and 2%, but the market generally views this impact as temporary, with the dollar rebounding more significantly in the short term.
Policy Divergence and Intervention Risks as a Hedge
Although the strengthening dollar directly pressures the yen, the market remains wary of possible exchange rate interventions by Japanese authorities. Recently, several government officials emphasized that if exchange rate volatility becomes excessive, they will "not rule out taking all necessary measures" to stabilize the market. This led some bearish positions to remain cautious at high levels.
Forex strategists noted that the risk of currency intervention limits upward momentum for USD/JPY, but given the significant interest rate differential between the U.S. and Japan, a sustained yen rebound is challenging. Meanwhile, dovish voices within the Federal Reserve have strengthened. Market pricing shows the probability of a 25 basis point rate cut in December has exceeded 60%, with the dollar index slightly retreating but remaining generally strong.
Technical Indicators Show Dollar Bulls in Control
From a technical perspective, USD/JPY continues to trade above the 9-day and 20-day exponential moving averages, with a bias towards bullish trends. Key support levels are concentrated in the 154.00 to 153.00 range, and a break below could trigger a short-term correction. The main resistance level above is at 154.50, and if breached, it could further target the 156.00 mark.
The Relative Strength Index (RSI) remains between 63 and 65, indicating buying momentum is still strong but not yet in overbought territory. Analysts believe that with policy uncertainty and potential intervention expectations coexisting, market volatility might rise, but the overall trend still favors the dollar.
Short-term Yen Weakness May Continue
In summary, the resonance of the Bank of Japan delaying rate hikes and the alleviation of U.S. fiscal risks continues to pressure the yen in the short term. If the Japanese government's economic stimulus package in November further expands spending, the market may strengthen its expectations for the central bank to maintain an accommodative stance, with USD/JPY likely to remain in a high consolidation pattern.
Analysts predict that unless the Bank of Japan sends stronger signals of policy tightening at its December meeting, the yen will struggle to break out of its weak trend. In the short term, traders will closely monitor the Japanese government's fiscal statements and U.S. inflation data to determine the next direction for the USD/JPY.
