FX.co ★ Japanese Yen Weakens on Fiscal Concerns

On Tuesday, the Japanese yen slipped to approximately 156 per dollar during light holiday trading, reversing the gains seen in the previous session. This movement came as investors evaluated Japan's extensive fiscal policy. Recently, the cabinet sanctioned Prime Minister Sanae Takaichi's unprecedented 122.3 trillion yen budget, which aims to strike a balance between robust fiscal expenditure and debt management by restricting new bond issuances. Nonetheless, concerns persist about Japan's fiscal standing, given that public debt already surpasses twice the nation's economic size, limiting the government's capacity to embark on significant stimulus initiatives. Despite this, the yen's decline was somewhat cushioned by indications from authorities about possible market intervention. This followed Finance Minister Katayama's assertion of Japan's ability to respond to extreme currency fluctuations. In terms of monetary policy, the market is eyeing a potential interest rate hike in July, although an earlier adjustment could occur if the yen depreciates further.