Himino’s Speech Sends Yen Lower. Forecast as of 02.09.2025
The US dollar recovered slightly after the Federal Appeals Court’s verdict, while the Bank of Japan refrained from raising rates. As a result, the USDJPY pair soared. Let’s discuss this topic and make a trading plan.
The article covers the following subjects:
Major Takeaways
- The Bank of Japan remains cautious.
- The dollar is recovering after the court ruling.
- Divergence in monetary policy remains in place.
- Short trades on the USDJPY pair can be opened on a rebound from ¥149.9 and ¥150.7.
Weekly Fundamental Forecast for Yen
Speculators had been overly optimistic about the imminent strengthening of the Japanese yen. The US’s path to fiscal dominance and the rapidly growing political risks in France could have triggered a sell-off in USDJPY quotes. The demand for put options on the pair was four times greater than the demand for calls. The market was anticipating a signal that would provide clarity, and the absence of such a signal led to disappointment.
Investors expected that Ryozo Himino would maintain the suspense leading up to the Governing Board’s September meeting. However, the deputy governor has advised the BoJ to exercise caution in implementing any monetary tightening measures, either too rapidly or too slowly, in light of the prevailing risks of inflation and economic growth. The likelihood of an overnight rate increase by the end of the year decreased from 70% to 63%. Japanese bond yields declined from their highest levels since 2008, and the USDJPY pair rose.
10-Year Japanese Government Bond Yield
Source: Bloomberg.
Ryozo Himino drew attention to the risks of growing disinflationary pressure. He stated that US tariffs could temper the global economy and global demand for commodities and other goods.
Indeed, Japanese inflation continues to slow down. In August, consumer prices in Tokyo, a leading indicator for the national CPI, rose by 2.9%. In July, the rate was 2.9%. Excluding energy prices, inflation slowed from 3.1% to 3%. However, this trend should not be a cause for concern for the Bank of Japan, as the figures have consistently exceeded the 2% target. At the same time, the slowdown in their growth rate increases real wages, which accelerates GDP.
Tokyo Inflation Index
Source: Bloomberg.
The reaction of the USDJPY to the speech by the deputy governor of the Bank of Japan was exaggerated. Both the excessively inflated bearish demand and the recovery of the US dollar after the Federal Appeals Court ruled that Donald Trump’s tariffs were illegal supported USDJPY bulls.
The greenback is recovering across the board, as investors realize that import duties will remain in place until mid-October. In addition, the US administration has many options, from appealing to citing other laws to justify the tariffs. Even if they are canceled, it will be good news for the US economy. It will not slow down as expected, while inflation will stop accelerating.
After all, if tariffs caused the USD index to fall by 10% in the first half of the year, why would their cancellation not force investors to reconsider their views on the US dollar?
Weekly USDJPY Trading Plan
Meanwhile, no fundamental changes are expected in the near future. The downward trend in the USDJPY remains intact due to divergence in monetary policy, and the pair’s growth is merely a correction. The US dollar’s inability to consolidate above ¥148.7 or a rebound from the resistance levels of ¥149.9 and ¥150.7 will give a sell signal.
This forecast is based on the analysis of fundamental factors, including official statements from financial institutions and regulators, various geopolitical and economic developments, and statistical data. Historical market data are also considered.
Price chart of USDJPY in real time mode
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