Yen Nears 155 as Takaichi Backs Prolonged BOJ Pause
Japan’s fiscal pivot under Prime Minister Sanae Takaichi is reshaping expectations for the Bank of Japan’s policy path. With a renewed push for large-scale stimulus and spending, Takaichi has signaled a preference for keeping interest rates steady for as long as possible—starting with the BOJ’s next decision in December.
Her remarks that Japan “cannot say it has emerged from deflation” and that “appropriate monetary policy is very important” underscore a cautious stance on tightening. Despite periodic verbal intervention from Tokyo, the yen remains on the defensive, with USD/JPY edging toward the 155 mark as currency markets price a slower normalization of Japanese monetary policy.
Markets are now repricing both the fiscal outlook and the BOJ’s trajectory. Even after the recent yen slide, futures still imply roughly a one-in-four chance of a BOJ rate cut in December—leaving room for further unwinding of tightening bets if Takaichi’s stance prevails. The broader risk is that, even if the BOJ eventually raises rates, political preference for looser financial conditions could limit the duration or depth of tightening. In that scenario, yen weakness could persist, and traders may continue to fade rallies, particularly across higher-yielding crosses.
Key Points – Prime Minister Sanae Takaichi supports keeping BOJ interest rates unchanged to back fiscal stimulus. – She says Japan has not definitively exited deflation and stresses the need for appropriate monetary policy. – USD/JPY is approaching 155, with the yen under pressure despite verbal intervention. – Markets still price about a 24% chance of a BOJ rate cut in December. – Investors are repricing Japan’s outlook amid fiscal easing and a potentially prolonged BOJ pause. – Persistent yen softness is possible even if the BOJ hikes later, encouraging traders to fade yen rebounds.
