USD/JPY became active following the announcement of personnel changes in Kasumigaseki and Nagatacho, while long-term interest rate trends and the outlook for politics and fiscal policy have been affecting the yen exchange rate. In August, USD/JPY fell to around 155 before rebounding, and long-term interest rates temporarily exceeded 3%. Further movement may emerge around the September Cabinet reshuffle.
Japanese long-term interest rates began rising again around the time the appointments of senior officials in Kasumigaseki were announced. In tandem, USD/JPY temporarily fell to 155 before moving higher.
The rise in long-term interest rates was viewed by the market as a factor driving yen depreciation, against a backdrop of expectations for higher U.S. interest rates and concerns about fiscal discipline. In addition, as coordinated intervention came into focus, yen depreciation accelerated toward the end of August.
Reports surrounding the Cabinet reshuffle after the start of September led to growing views that Finance Ministry-affiliated officials would remain in office and that a major overhaul would be avoided. Views also emerged that this would affect long-term interest rates and the yen exchange rate.
Overall, many observers believe that personnel changes in political and bureaucratic circles and the outlook for fiscal policy are closely linked to movements in the yen exchange rate. Whether the Takaichi administration's proactive fiscal policy continues is expected to affect the future course of long-term interest rates and the direction of the yen, whether toward appreciation or depreciation.