Nomura has a long JPY bias due to uncertainty surrounding US tariff policy and the Bank of Japan’s (BoJ) focus on yen stability. While no early rate hikes are anticipated, Japan’s policy suggests support for the yen remains.
Unpredictable US trade policies create market volatility, positioning the yen as a safe haven. The BoJ’s recent meeting minutes indicate its attentiveness to yen depreciation, providing implicit support for the currency.
### Domestic Policy Considerations
Furthermore, Prime Minister Ishiba is advocating for anti-inflation measures ahead of elections, which could mitigate inflation risks. Overall, the combination of external volatility, the BoJ’s response, and domestic policies lends support to a long JPY strategy.
Nomura’s outlook on the yen reflects a broader expectation that Japan’s policymakers will act to prevent excessive depreciation. The absence of immediate rate hikes does not indicate inaction but rather a preference for stability. This aligns with the Bank of Japan’s continued focus on exchange rate movements, reinforcing the perception that excessive weakness in the yen will not be ignored.
The unpredictability surrounding US trade tariffs is not just a theoretical concern. Previous policy shifts from Washington have triggered abrupt reactions across currency markets, with the yen reliably strengthening in times of uncertainty. That pattern appears to be intact. The latest meeting minutes from the Bank of Japan suggest policymakers are well aware of the risks stemming from yen weakness. While no direct steps have been taken, the implicit message is clear: support remains in place to counter uncontrolled declines.
### Yen Stability Going Forward
Domestically, Ishiba’s push for anti-inflation policies adds a new layer to the equation. By signalling an intent to prevent excessive price increases, his stance could dissuade expectations of prolonged yen weakness. Elections add further complexity. Policymakers often seek currency stability in the lead-up to political events to avoid economic uncertainty overshadowing broader policy goals. If these measures gain traction, they may indirectly contribute to yen strength.
With external volatility persisting and Japan’s approach hinting at ongoing currency management, the bias towards a stronger yen remains rational. The consistent messaging from policymakers reinforces that stability remains a priority.
