Yen Stuck at 155.5, Dollar Remains Strong
The Japanese yen remained in the 155.5 per dollar area on Tuesday (March 2), after weakening for two consecutive sessions. The main reasons were the strengthening of the US dollar, supported by solid US economic data and the sentiment of a "tight" interest rate policy.
Pressure on the yen also came from comments by Japanese Prime Minister Sanae Takaichi, who said a weak yen could be an opportunity for the export industry. Although she later clarified that her intention was to promote an economy resilient to currency fluctuations, the market took the signal that the government was not concerned about a weaker yen.
Finance Minister Satsuki Katayama also reassured the market, saying the Prime Minister's statement was merely explaining general economic principles regarding the impact of a weak currency. However, for the market, the "weak yen benefits exports" narrative could still be an additional reason to pressure the yen.
The yen's weakening also comes ahead of Japan's snap House of Representatives elections on February 8, where Takaichi's ruling party is expected to gain seats and push for expansionary fiscal policy. Expectations of government spending and stimulus typically lead the market to assess the risk of a rising deficit, which could weigh on the yen.
Last month, Japanese government bonds and the yen both weakened as the market had already priced in potential stimulus and tax cut discussions. If these discussions become more serious, pressure on public finances could increase—and the yen could remain vulnerable as long as the US dollar remains strong. (asd)
Source: Newsmaker.id
