The Japanese yen came under strong downward pressure following reports of Prime Minister Sanae Takaichi's intervention in monetary policy. The head of government expressed concerns about further interest rate hikes, raising questions about the central bank's independence. Meanwhile, optimism prevails on the Tokyo stock exchange, where analysts predict the main Nikkei 225 index will rise to the 60,000-point level in the coming year.

Yen weakened by politics

The yen's exchange rate fell following reports of Prime Minister Takaichi's skeptical stance towards further interest rate hikes in Japan.

Record forecasts for Nikkei

Analysts predict that the main Tokyo stock index will reach a historic level of 60,000 points by mid-2027.

Interventions in India

The Indian central bank is defending the rupee's exchange rate in the face of pressure on emerging market currencies and uncertainty over tariffs.

The Japanese currency's exchange rate recorded a noticeable decline against the US dollar, hovering around the 155-156 yen level. The direct cause of the yen's weakening is reports from the Mainichi newspaper, according to which Prime Minister Sanae Takaichi personally expressed concern to Governor Kazuo Ueda about tightening monetary policy. The market interpreted this as a signal that the anticipated cycle of interest rate hikes could be slowed by political factors. Investors fear that undermining the independence of the Bank of Japan will limit its ability to fight inflation. Despite political turbulence, data from the real economy suggests persistent price pressure driven by wage growth. Inflation in the services sector remains stable, which theoretically would justify further hikes. However, the situation is complicated by external factors, including Chinese export restrictions and uncertainty related to new US tariffs. In this context, the Indian rupee is also struggling with capital outflow pressure, and its central bank is forced to actively defend the exchange rate around the level of 91 rupees per dollar. Since 2013, Japan has pursued an aggressive quantitative easing policy, known as Abenomics, aimed at pulling the country out of long-term stagnation. It was only in 2024 that the Bank of Japan decided to move away from negative interest rates, marking a historic shift in Japan's economic strategy.„I believe that premature interest rate hikes could stifle the economy’s recovery from deflation.” (I believe that premature interest rate hikes could stifle the economy’s recovery from deflation.) — Sanae Takaichi Completely different sentiments prevail in the capital market. According to a Reuters agency survey, analysts expect the Nikkei 225 index to break the 60,000-point barrier by mid-2027. This optimism is based on solid financial results from Japanese companies and growing foreign investment inflows, for which the weak yen makes Japanese assets more price-attractive. Currently, the Tokyo stock exchange is opening on a positive note, continuing its upward trend despite currency concerns. Forecasted level of the Nikkei 225 index: 2025-02: 39500, 2025-12: 48000, 2026-12: 55000, 2027-06: 60000 60 000 — expected level of the Nikkei 225 index in 2027

Mentioned People

  • Sanae Takaichi — Prime Minister of Japan, expressing concerns about the impact of interest rates on the economy.
  • Kazuo Ueda — Governor of the Bank of Japan responsible for the country's monetary policy.