The Japanese yen weakened in Asian trading on Monday against a basket of major and minor currencies, resuming its decline after a brief pause in the previous session against the US dollar, and moving once again toward its lowest levels in ten months. The currency remains under clear pressure amid persistent concerns over the stimulus-heavy policies of Prime Minister Sanae Takaichi.

At the same time, analysts see little chance of direct intervention to support the yen before it reaches 160 per dollar. Investors are also awaiting additional clues on the Bank of Japans path toward policy normalization and potential rate hikes.

Price Overview

USD/JPY rose about 0.3% to 156.80 from an opening level of 156.37, after touching a session low of 156.37.

The yen ended Fridays session with a 0.7% gain against the dollar its first advance in six days supported by bargain-buying after hitting a ten-month low of 157.89 the day before.

The currency lost 1.2% last week, marking a second consecutive weekly decline, pressured by Takaichis stimulus package.

Takaichis Stimulus Policies

Japans cabinet, led by Sanae Takaichi, approved a 21-trillion-yen (135-billion-dollar) economic stimulus package late last week the administrations first major policy initiative. The program reflects her expansionary fiscal approach aimed at supporting Japans sluggish economic activity.

The package includes 17.7 trillion yen in general-account spending, far exceeding last years 13.9 trillion yen, making it the largest stimulus since the COVID-19 pandemic. It also features 2.7 trillion yen in tax cuts. The government plans to approve a supplementary budget on 28 November to secure parliamentary approval before year-end.

Views and Analysis

Christopher Wong, FX strategist at OCBC, said intervention is not off the table before USD/JPY reaches 160, adding that any move could be sharp given thin liquidity conditions.

Michael Boutros, chief strategist at StoneX, noted an ongoing tug of war between the Bank of Japan and the new prime minister, who is highly pro-business and wants markets to remain very comfortable.

Boutros added: I dont think they will move on rates anytime soon. What we may see instead is talk of intervention and more warnings as these moves continue.

Japanese Interest Rates

The market currently prices a roughly 35% chance of a 25-basis-point BOJ rate hike in December.

To reassess these probabilities, investors are watching upcoming data on inflation, unemployment, and wage growth in Japan.