【Exchange Rate Outlook for 2025】A gradual strengthening of the yen? The risks of Trump and central bank policies also pose the danger of a 'Black Monday' like in the Reiwa era.

An important factor in predicting the stock price in 2025 is the movement of the Dollar-Yen exchange rate.In 24, stock prices generally followed the pattern of 'strong yen = higher stocks', with the historically low yen contributing to the rise in stock prices.On the other hand,The rapid appreciation of the yen accelerated by statements from the central bank tops of Japan and the United States prompted a rapid unwinding of yen carry trades by overseas hedge funds, leading to the 'Reiwa Black Monday'.。
Summarizing the projected rate movements for 25 by world financial institutions, reflecting on the impact of the 24 Dollar-Yen rate movements and the Japanese economy, while examining the risk factors affecting stock prices.

In 2025, a slow appreciation of the yen is the main scenario, with minimal impact on stock prices.
In 2025,Many financial institutions expect the yen to gradually appreciate towards the end of the year.。
According to Bloomberg, as of December 16, banks and securities firmsThe average value of the forecast rates for 25 years by 69 institutions is 151 yen at the end of March, 149 yen at the end of June, 148 yen at the end of September, and 146 yen at the end of December.This marks the highest order intake for the period of April-September.
Centered on Japan and the United States.Even in 9 global financial institutions, 6 institutions expect the yen to strengthen throughout the year.is in effect.

Be cautious of unexpected words and actions from the dovish Bank of Japan and hawkish U.S. Federal Reserve.
One of the major factors causing significant fluctuations in the dollar-yen exchange rate is the policies of the central banks of Japan and the U.S.In 2025, there is a high possibility that the Bank of Japan will raise interest rates while the U.S. Federal Reserve will lower them, potentially causing significant rate movements depending on timing, frequency, and statements by officials.At present, in 2025, both Japan and the U.S. are expected to raise and lower interest rates at a slow pace. There is market consensus that the narrowing interest rate spread between Japan and the U.S. will progress gradually, leading to the exchange rate forecast of a 'mild yen appreciation trend'.There is market consensus that the narrowing interest rate spread between Japan and the U.S. will progress gradually, leading to the exchange rate forecast of a 'mild yen appreciation trend'.。
The formation of the market consensus was reached at the December 19 meeting of the US FOMC and the Bank of Japan's monetary policy meeting, which took place at Japan time.The shift of the US Federal Reserve to a "hawkish" stance and the Bank of Japan to a "dovish" stance became clear.In the FOMC dot chart, the observation of a rate cut in 2025 halved from 4 times as of September. On the other hand, the Bank of Japan, while skipping the observation of a rate hike in December, Governor Kuroda mentioned in the post-meeting press conference that "to arrive at a judgment for the next rate hike, inaccurate as it may be, we need a little more." This led the market to perceive that there is no rush for a rate hike.
In the future, if central bank leaders and officials from both countries make statements or take actions that differ from the current consensus, there is a possibility that exchange rates may move differently than previously expected. The focus will initially be on whether the Bank of Japan will go ahead with a rate hike in January after the turn of the year, and how they will explain the decision.

"Yen depreciation" has also become a major theme in the 24th year of the Japanese economy. For the industrial sector and the stock market,contributing to boosting the profits of export-related industries and contributing to the renewal of the highest stock prices since the bubble period, the "good yen depreciation" had a significant impact. On the other hand, from the perspective of consumers, the "bad yen depreciation" leading to imported inflation due to rising import prices such as petroleum, was a major concern.It is said that one of the reasons for the ruling party, including the LDP, falling below the majority in the October general election, was the dissatisfaction of the people with high prices. As a measure against the "bad yen depreciation", the Ministry of Finance conducted yen buying interventions for the first time in a year and a half since October 2022. The foreign exchange interventions took place on April 29 (5,918.5 billion yen), May 1 (3,870 billion yen), July 11 (3,167.8 billion yen), and July 12 (2,367 billion yen), totaling four times.Rapid reversal of yen appreciation inviting the "Reiwa Black Monday"The additional interest rate hike by the Bank of Japan in July is also believed to be partly due to the rapid yen depreciation. Governor Ueda stated at a press conference after the interest rate hike decision, "Compared to the past, exchange rate fluctuations are more likely to have an impact on prices" and "The risk of actual results exceeding the outlook for inflation due to yen depreciation is quite significant."

"Surprise rate hikes and Governor Ueda's hawkish remarks accelerated yen appreciation, leading to the 'Reiwa Black Monday' in August, which recorded the largest drop in the Nikkei Average history.
During the July additional interest rate hike by the Bank of Japan, rapid yen depreciation is also considered as one of the factors. Governor Ueda expressed in a post-rate hike press conference that "Compared to the past, exchange rate fluctuations tend to have a greater impact on prices" and "The risk is significant that actual results will exceed the outlook for inflation as a result of yen depreciation.".The surprise rate hike and Governor Ueda's hawkish comments accelerated yen appreciation, leading to the 'Reiwa Black Monday' in August, which marked the largest drop in the history of the Nikkei Average.。