On November 19th, Robert Savage of The Bank of New York Mellon Corporation (BNY) offers insights into the Japanese yen's trajectory, forecasting a potential rebound in 2025 as the Bank of Japan (BOJ) normalizes interest rates.
Key Takeaways:
The Bank of Japan (BOJ) is now a key driver in setting the direction of the yen.
A supplemental budget and higher inflation suggest the BOJ may normalize interest rates, possibly starting in December.
If the BOJ acts in December, the yen might not weaken to 160 against the dollar.
If normalization begins in January, reaching 160 is more likely.
Over 2025, the yen is expected to strengthen as the BOJ normalizes rates, potentially reaching 1% interest rates.
Why the BOJ Won't Intervene: Ira Epstein from Linn and Associates
Key Takeaways:
The yen is falling sharply, though it hasn’t hit its all-time low seen in the December contract.
Despite discussions about raising interest rates, the Bank of Japan has not acted.
The Bank of Japan wants to ensure inflation is under control before adjusting rates.
A weaker yen increases the cost of imports, driving inflation.
Japan, despite its economic size and productivity, relies heavily on imports.
The Bank of Japan is unlikely to raise interest rates until it is confident inflation is stable and manageable.
