Get 40% Off
⚠ Earnings Alert! Which stocks are poised to surge?
See the stocks on our ProPicks radar. These strategies gained 19.7% year-to-date.
Unlock full list

USD/JPY Could Go As Low As 150

Published 09/06/2022, 06:21 AM
Updated 03/21/2024, 07:45 AM

The Japanese yen is renewing 24-year lows against the dollar, and so far, policymakers have no safe tools to stop this decline.

USD/JPY monthly price chart.

The USD/JPY was above 141 on Tuesday morning, last seen in the first half of 1998. At that time, the Japanese Ministry of Finance intervened in the FX market to stop the collapse of the national currency in a few months.

In 1990 it took the USD/JPY about three quarters to move above 140 and was a corrective rebound. The pair have not traded consistently above current levels since 1987. The current pair's values are almost twice as high as the lows of 2011, which underlines the historical reversal in several directions.

The USD/JPY are closely correlated with the spread between the US and Japan bond yields. As Japan targets yields on its debt market curve, US bond yields are the only variable in the equation. The latter is rising at an unprecedented rate. The Fed only adds fuel to the fire to suppress inflation as quickly as possible, not letting inflationary expectations take root.USD/JPY daily chart.

That said, there are no signs yet that inflation in Japan is recovering. It might sound surprising, but the latest data shows that wage growth in July has slowed to 1.8% compared to 2.0%. Household spending rose by 3.4% YoY, but this is a weak result compared to 3.5% a month earlier and the expected 4.5%.

Sluggish economic growth and the need to service government debt of roughly 200% of GDP reduces the room for maneuver for the Bank of Japan, as a high key rate would multiply the government debt service costs. Sluggish inflation and consumer spending figures also remove the need for tightening monetary policy.

The USD/JPY has likely crossed the informal line near 135, entering a deeper decline phase. Suppose the weakening of the yen continues in a relatively calm regime. There may not be any significant stops and turns before 150 (the psychologically important round level) or even 160 (near peak in 1990).

Latest comments

okay
No alexander if the pair growth much …. Recession in currency started ….. the reason is because no corrections from 100 to 143 ….. if growth need correction to 150 …. The PIB of japan is crashing…. Japan died
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.