Yen weakens amid BoJ uncertainty, political instability, and US dollar strength

The Japanese yen resumed its decline against the U.S. dollar following last week’s brief rebound.

A summary from the Bank of Japan’s (BoJ) October policy meeting revealed mixed opinions among BoJ officials about when to raise interest rates, citing ongoing market volatility.

This uncertainty has tempered expectations of an immediate rate hike, particularly in December. The bearish sentiment surrounding the yen remains in the near term as the BoJ’s cautious approach to tightening and ongoing market volatility continue to weigh on its value.

The yen could continue to suffer from political instability related to Prime Minister Shigeru Ishiba’s leadership, after his coalition’s recent loss of a parliamentary majority. The medium-term outlook for the yen leans towards a bearish sentiment, as both economic policy uncertainties and political instability in Japan are likely to keep downward pressure on the currency. Meanwhile, bond market dynamics suggest further strengthening of the U.S. dollar, which may exacerbate challenges for the yen in the coming weeks.