The Japanese yen declined in the Asian market on Friday against a basket of major and minor currencies, continuing to move in negative territory for the second consecutive day against the US dollar, and is on the verge of incurring a second straight weekly loss, ahead of the House of Councillors elections in Japan during the weekend.
Data showed a slowdown in core inflation in Japan, which reduced inflationary pressures on monetary policymakers at the Bank of Japan, leading to a decline in the likelihood of a rate hike in July.
The Price
The dollar rose against the yen by about 0.1% to (148.71), from todays opening price of (148.60), recording a low of (148.30).
The yen lost 0.5% against the dollar at Thursdays settlement, resuming losses that had paused the previous day as part of a recovery from a three-month low of 149.19.
Weekly Trading
Over the course of this weeks trading, which officially concludes at todays price settlement, the Japanese yen is down so far by about 0.85% against the US dollar, and is on track to record a second consecutive weekly loss.
Japanese Elections
On July 20, Japan will hold House of Councillors elections, where 124 out of 248 members will be elected for six-year terms. These elections are considered a key indicator of the ruling government's popularity.
This is especially significant after the October 2024 House of Representatives elections, in which the ruling coalition (the Liberal Democratic Party and Komeito) lost its majority, potentially affecting the dynamics of the upcoming elections.
The latest opinion polls in Japan showed that Prime Minister Shigeru Ishibas coalition is at risk of losing its majority in the House of Councillors.
Trade Negotiations
Japans chief trade negotiator, Ryusei Akazawa, held talks with US Trade Secretary Howard Lutnick on Thursday regarding tariffs, as Tokyo strives to avoid the imposition of a 25% tax unless an agreement is reached by the August 1 deadline.
Core Inflation
Data released today in Tokyo showed that Japans core Consumer Price Index rose by 3.3% in June, below market expectations of a 3.4% increase. The index had risen by 3.7% in June, the highest level since January 2023.
Undoubtedly, the slowdown in prices reduces inflationary pressures on monetary policymakers at the Bank of Japan, thereby diminishing the chances of interest rate hikes in the second half of this year.
Japanese Interest Rate
Following the above data, the pricing of the likelihood that the Bank of Japan would raise interest rates by a quarter percentage point in the July meeting declined from 45% to 35%.
To reassess those expectations, investors are awaiting the release of further data on inflation, unemployment, and wages in Japan.