With USD/JPY holding around ¥159 in the New York foreign exchange market, the dollar has weakened following a decline in U.S. retail sales and deterioration in consumer sentiment at the University of Michigan, while views are spreading that further yen depreciation will be contained. It has also been reported that the Japanese government wants to prevent the yen from weakening further.
During New York trading, USD/JPY has been moving around the ¥159 level. The dollar has generally weakened after U.S. retail sales fell unexpectedly in July and the University of Michigan Consumer Sentiment Index came in below market expectations, although the yen has also weakened, allowing USD/JPY to maintain some support on the downside.
Overseas strategists say that, for the Japanese government, a situation in which the yen is weak but does not weaken further may be more consistent with its policy objectives than promoting yen appreciation. The view is that curbing yen depreciation and wanting the yen to appreciate substantially are separate matters.
The yen's sharp appreciation after the Plaza Accord is also cited as a reason Japanese authorities remain cautious about moving too far toward substantial yen appreciation. Some observers remain cautious about policies that encourage the repatriation of funds to contain long-term Japanese government bond yields.
While yen depreciation lifts nominal GDP and increases the yen-denominated value of overseas assets, Japanese authorities are believed to be aiming to maintain a stable level of yen depreciation while avoiding a sharp appreciation.