Against the backdrop of market developments and policy uncertainty following the U.S. midterm elections, views have emerged that pressure for yen depreciation will ease. However, the yen could move again depending on the course of policy management.
Following the U.S. midterm elections, views have spread in the foreign exchange market that pressure for yen depreciation will ease. It has been reported that falling U.S. interest rates and declining equities could trigger dollar selling.
Since taking office, the Trump administration has unsettled markets through high tariffs and expansionary fiscal measures, but uncertainty remains high surrounding developments involving the exercise of presidential powers. There was also a period when heightened tensions in the Middle East prompted safe-haven dollar buying, while oil price movements affected the yen.
As the likelihood increases that the Democratic Party will take control of Congress, market participants have expressed the view that restraints could be placed on fiscal management and foreign and military policy. There are also claims that a decline in oil prices resulting from easing geopolitical tensions could narrow the Japan-U.S. interest-rate gap and provide a factor supporting yen buying.
As demand for AI has influenced stock prices, there are concerns that developments in AI-related regulation and changes in the investment environment could strengthen risk aversion in the market. Some views also hold that a review of fiscal spending on inflation measures could ease fiscal concerns and that lower long-term interest rates could support yen appreciation.