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2025-12-15 17:43:43
[The Yen's Dilemma: Deeply Sinking into the Low-Interest-Rate Quagmire, Unlikely to Turn Around in 2026] ⑴ Japan's current interest rate of 0.5% is projected to rise only to 1% by the end of 2026. Even in an extreme scenario reaching 1.25%, it would still be among the lowest interest rates among major global economies. ⑵ Although the Bank of Japan is considered particularly hawkish this year, its rate hikes are unlikely to significantly exceed current market expectations, resulting in limited tightening. ⑶ This slow pace of tightening, while potentially slowing the yen's decline, may not be sufficient to fundamentally reverse its weakness and could even weaken its efforts to curb domestic inflation. ⑷ Since April of this year, the yen's trade-weighted exchange rate has fallen significantly from 58.91 to 54.72 at the end of October, approaching the historical low of 53.06 reached in July 2024. ⑸ Therefore, in the foreseeable future, Japan's ultra-low interest rate environment will continue to exert structural pressure on the yen. Market analysts believe that additional measures, such as monetary intervention, may be necessary to prevent further sharp declines in the yen.
