JPMorgan Chase believes that the White House's focus on interest rate cuts may backfire, exacerbating inflationary pressures and pushing interest rates higher. Trump, on the other hand, bluntly stated that Jamie Dimon's views were flawed, claiming he only wanted to maintain high interest rates to allow his own banks to earn more profits. Trump also called Federal Reserve Chairman Jerome Powell a "villain," believing he was hindering the US economy from prospering.



The performance of the US economy has indeed been surprisingly strong. The World Bank pointed out that the US economy has demonstrated strong resilience to tariff policies and raised its 2025 US GDP growth forecast from 1.4% to 2.1%, and its 2026 growth forecast from 1.6% to 2.2%. It is worth noting that the growth in these economic indicators is not based on White House policies, but rather stems from large-scale investment in artificial intelligence technology. However, Trump has his own perspective. The former president stated that the US government has achieved explosive economic and productivity growth in the past 11 months, successfully curbing inflation while simultaneously driving a boom in investment markets. Will there be more impressive performances in the future?

However, we have had to adjust our campaign strategy for the midterm elections. While US inflation has fallen to the 2.6%-2.7% range, it remains significantly above the 2% policy target. Despite strong GDP growth, a cooling labor market has prompted the Federal Reserve to lower interest rates from 4.5% to 3.75% in 2025. Currently, Federal Open Market Committee (FOMC) officials believe that monetary policy is in an appropriate range and plan to maintain the current pause in interest rate adjustments, a stance that supports the US dollar.

Meanwhile, the yen continued to weaken. Investors anticipate that Sanae Takashi will dissolve the Diet and call a new general election as early as February. This expectation pushed up Japanese government bond yields, and the dollar-yen exchange rate surged to an 18-month high, returning to the range where the Japanese government previously intervened in the foreign exchange market. The more solid the ruling Liberal Democratic Party's (LDP) position, the greater the likelihood of a larger-scale fiscal stimulus package. At the same time, the Japanese government may pressure the central bank to prevent it from raising interest rates, as this would directly increase the cost of servicing government bonds.

Against this backdrop, Kazuo Ueda's statement that "the process of normalizing monetary policy will continue, provided that the Bank of Japan's established conditions are met" appears reasonable and well-founded. Investors expect the Bank of Japan to refrain from raising interest rates before June, while the Federal Reserve is likely to maintain its stance of pausing interest rate hikes for an extended period. These multiple factors have collectively driven the USD/JPY exchange rate higher.