Will the Japanese Yen fall further? From 156 to 160, how much more depreciation is there in this wave?

The depreciation of the Japanese Yen has become a certainty. The market is now concerned with: how much further will it fall?

Policy Game Intensifies, Central Bank Rate Hike Expectations Suppressed Again

Bank of Japan Governor Ueda Kazuo previously hinted that a rate hike could happen as early as December, but that signal is now widely dismissed. A series of actions by Prime Minister Takashi Goto’s government is fundamentally changing market expectations — the latest data shows that the market assigns only a 28% probability of the BOJ raising rates in December, rising to just 42% by January next year.

The key point is that Goto’s economic advisor Goushi Kataoka has explicitly stated: fiscal spending is preferable to monetary policy normalization, and the BOJ is unlikely to raise rates before March next year. This effectively amounts to the government directly pressuring the central bank to cooperate with economic stimulus plans. Nomura Securities FX strategist Yujiro Goto succinctly commented: “Investors are aware of the fiscal expansion trend, which may lead the BOJ to delay rate hikes, prompting them to sell the yen.”

17 Trillion Yen Fiscal Plan, Yen Under Further Pressure

On November 21, Goto’s economic stimulus plan will officially be announced, with a reported budget exceeding 17 trillion yen. What does this mean? It indicates that the Japanese government plans to print a large amount of money, while the central bank is constrained from raising rates to counteract it. The pressure on the yen’s depreciation is thus further locked in.

Data is already speaking: on November 19, Japan’s 10-year government bond yield rose to 1.78%, a high not seen since 2008; the 20-year bond auction results were weak, raising concerns about the government’s borrowing scale.

USD/JPY Approaching 156, Speculators Still Testing Government’s Bottom Line

USD/JPY has now approached the 156 level, with speculators continuing to add positions. Francesco Pesole, FX strategist at ING Group, said: “Speculators remain clearly inclined to buy USD/JPY, testing Japan’s tolerance. The government’s verbal warnings are increasingly less effective in influencing the market.”

In other words, mere words from the Japanese government are no longer intimidating the market. In the coming days, we may see further upward pressure, with the bottom line possibly approaching the 160 mark — this is no longer a forecast but a script the market is playing out in real time.

Future Outlook: Will the Yen Fall Further?

Barclays economist’s conclusion is straightforward: considering Goto’s inclination towards “Abenomics” policy stance, continued pressure on the yen is highly probable. Further fiscal expansion is expected to keep USD/JPY at elevated levels. Barclays recommends investors continue to go long on USD/JPY.

The conclusion is clear — the yen will continue to fall. The policy environment determines this; unless the BOJ suddenly adopts a hard stance or the government changes its tone, the move from 156 to 160 is no longer a question of “if,” but “when.”