The view is that a shift toward yen appreciation could become more pronounced depending on crude oil prices, and USD/JPY fell temporarily to the low ¥156 range last week as yen buying progressed. The report also discusses expectations for a Bank of Japan rate hike and the situation in the Middle East.
As the global rise in interest rates shows signs of reaching a plateau, buying back the yen has gathered pace in the foreign exchange market, and USD/JPY fell to the low ¥156 range last week. The backdrop includes movements in US bond-market yields and renewed recognition of the yen's relative appeal.
As for long-term interest rates, the yield on 10-year US Treasuries fell below 5% late last week, while Japan's 10-year government bond yield also dipped below 2.8% at one point. Persistently high crude oil prices have been cited as a factor that could delay a shift toward yen appreciation.
The Bank of Japan is widely expected to look toward a rate hike in December, while it is considered highly likely to leave rates unchanged at its October meeting. In its assessment of the inflation outlook, the Bank is expected to continue operating cautiously while placing importance on keeping underlying inflation near 2%.
Crude oil prices and developments in the Middle East are major factors affecting the yen for the time being. September trade data left a risk that the deficit could widen, while strong exports and a decline in the value of crude oil imports also contributed to an improvement in the balance.