The Japanese Yen falls to a two-week low against the USD, driven by rate differentials and fiscal concerns despite improving business sentiment.
The USD/JPY pair climbed to a 10-day high near 159.50 in Asian trading, extending gains as the Japanese Yen (JPY) remains under pressure. The initial boost from last week’s US-Japan joint currency intervention has faded, with the persistent rate gap between Japan and major economies sustaining carry trade demand.
Japan’s fiscal outlook has worsened amid Prime Minister Sanae Takaichi’s stimulus measures and tax cuts, while energy disruptions tied to Middle East tensions add further strain. Despite a rise in business sentiment—with the Reuters Tankan survey showing manufacturers’ confidence at an 18-month high—the JPY struggles to recover.
Markets are pricing in a 66% chance of a Bank of Japan rate hike in September, yet the USD’s strength, fueled by inflation concerns, continues to dominate. The pair’s momentum remains intact ahead of key US CPI data.