The yen exchange rate in '24 made a dramatic U-turn, and the yen appreciated for the first time in 4 years due to a reversal in monetary policy

・The Bank of Japan is considering policy changes, which is different from 2023 when the yen failed to appreciate

・Interest rates are rising in Japan, and there is a possibility that interest rates will fall in the US

　・Observations that the Bank of Japan will decide to cancel the negative interest rate policy at policy meetings on the 18th and 19th of this month increased, and the yen rose close to 4% in just 1 day. After that, after falling for 2 consecutive days, the yen appreciated again.

　・The Bank of Japan policy meeting in January and March will be an event to further strengthen speculation for the April meeting, where many BOJ watchers see the highest possibility of policy change. The inflation rate has been above the Bank of Japan target of 2% for over a year and a half, but the Bank of Japan is trying to obtain further confirmation of steady wage growth, and there is a possibility that this will be shown in the spring battle next year.

　・ “Long-term structural improvements in the Japanese economy have progressed sufficiently.” Steven Barrow, who is in charge of G10 strategy at Standard Bank, cited positive changes such as overcoming deflation and rising stock markets, and predicts that the yen will appreciate over the long term regardless of whether interest rate differences have been reduced or not. The exchange rate of yen one year from now is expected to be 1 dollar = 125 yen. The TSE stock price index (TOPIX) has risen more than 20% since the beginning of the year.

　・According to US Commodity Futures Trading Commission (CFTC) data up to December 5, asset managers have reduced their bearish positions against yen in recent months. Meanwhile, hedge funds are still skeptical about yen and maintain a high level of selling positions.

・ “Since the probability that the FRB and ECB will start cutting interest rates in June next year or before that has increased, it is expected that the appreciation of the yen and the depreciation of the dollar will progress. If the US economy enters a recession, there is a possibility that the dollar and yen will depreciate one step towards 130 to 135 yen, while in the case of a successful soft landing, around 140 yen could be an opportunity to buy the dollar.”

・ “If you look at interest rate cuts by overseas central banks and changes in the Bank of Japan's monetary policy, the dollar and yen will definitely be in a downward direction. However, it's hard to think about the yen's appreciation of 100 yen like it used to be. The economic recovery isn't as strong as it used to be.”

・ “There is a possibility that the Bank of Japan will not be able to tighten against the backdrop of US interest rate cuts, but the dollar and yen will fall only due to a reduction in interest rate differences between Japan and the US due to factors that lower US interest rates.”

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