USD/JPY rose temporarily into the ¥163 range. The pair is expected to peak in the ¥160–¥165 range during the summer, while the yen's depreciation momentum may ease toward year-end.
USD/JPY rose temporarily to the ¥163 level and remains elevated. Buying of the US dollar against the yen accelerated in the foreign exchange market against a backdrop of higher crude oil prices and expectations of a US rate hike. Goto Yujiro (後藤祐二朗) of Nomura Securities explains that USD/JPY will peak during the summer before turning toward a gradual appreciation of the yen and depreciation of the dollar by year-end.
Interest-rate expectations surrounding the Federal Reserve are divided. With the probability of a rate hike in July trending lower and US inflation expected to have peaked, one view is that the Fed is increasingly unlikely to rush to raise rates. Many market participants say they want to assess next week's FOMC meeting.
In domestic asset trends, increased GPIF investment in Japan and making Japanese Government Bonds for individuals eligible for NISA are under discussion. Against the backdrop of remarks by Finance Minister Katayama (片山) and others, measures to increase domestic asset investment by pension funds and promote bond investment are being considered. This could help stabilise the yen.
Reports indicate that making Japanese Government Bonds for individuals eligible for NISA, considering inheritance-tax preferences and designing new products may advance, while attention is focused on the Bank of Japan's interest-rate policy and improving supply and demand for domestic bonds. Changes to the Basic Policy at the end of July are also cited as a factor reinforcing caution in financial markets.