The USD/JPY pair has ascended to its peak since February, currently trading at approximately 152.45. The Japanese yen has experienced a depreciation exceeding 3% this week, as selling pressure has intensified in the wake of the release of disappointing wage data. This has considerably reduced market anticipations for additional interest rate increases from the Bank of Japan (BoJ).
The fundamental factor at play is a continual pressure on household finances: real incomes in Japan decreased by 1.4% year-on-year in August, marking the eighth consecutive month of decline. This indicates that the rate of price growth is surpassing the increase in wage earnings. BoJ Governor Kazuo Ueda has indicated the central bank’s preparedness to resume rate hikes if economic conditions and inflation meet projections, while also emphasizing the risks associated with potential US trade tariffs.
On the political front, investors are evaluating the ramifications of Sanae Takaichi’s triumph in the leadership contest. Her election, as a recognized advocate of the Abenomics stimulus programme, has strengthened anticipations of substantial budgetary infusions and the persistence of a lenient monetary policy approach.
The yen continues to face downward pressure due to disappointing domestic data and political indications that support ongoing stimulus measures, thereby diminishing the prospects for an imminent policy change from the Bank of Japan. From a technical standpoint, the trajectory of least resistance continues to trend upward, with significant resistance identified at 153.00. A successful breach of this level may pave the way for a notable upward movement, although one should anticipate short-term corrections amid the overarching bullish trajectory.