Yen's Slalom: Tensions between BoJ and Fed

The yen is trading near a five-month low against the US dollar, influenced by the contrasting stances of the US Federal Reserve and the Bank of Japan. While the Federal Reserve is tightening its monetary policy with a decisive message, the Bank of Japan remains cautious. Currently, the yen stands at 157.725 per dollar, a slight increase of 0.1% compared to the previous day, yet still near the last session's low of 158.09. This weakness has been evident since mid-July. The recently published minutes from the BoJ meeting in December reveal a division: some officials lean towards an imminent rate hike, while others remain skeptical due to uncertain wage trends and the economic policies of the upcoming Trump administration. Supportive inflation data from Tokyo, however, might fuel the rate hike debate. BoJ Governor Kazuo Ueda noted last week that it would take 'considerable time' to fully assess the economic outlook. In contrast, Fed Chief Jerome Powell emphasizes caution regarding further rate cuts after a recently decided expected quarter-percentage-point reduction. The measures proposed by Trump, such as regulatory relaxations, tax cuts, and stricter tariff and immigration regulations, are considered growth-promoting and potentially inflation-driving. The dollar is heading for a monthly gain of 5.4% against the yen, equating to an annual increase of 11.9%. Analysts from Mizuho Securities, Masafumi Yamamoto and Masayoshi Mihara, warn against an overextended dollar-yen trend and potential pullbacks. Additionally, Japanese officials might increasingly intervene against excessive currency movements. Japan's Finance Minister and leading currency diplomats have already raised the alarm and announced appropriate measures. The US dollar index remains stable at 108.09, having increased by 2.2% over the month. Currencies like the euro and the pound remain largely static in their development. Bitcoin, on the other hand, remains at 95,660 dollars, with the cryptocurrency having recorded an enormous increase of about 125% this year.