3 6 Ke·2025-11-10 08:59Core Viewpoint - Japanese financial institutions are revising their forecasts for the yen's exchange rate against the US dollar, expecting it to depreciate to a range of 149 to 156 yen by the end of the year due to fading expectations of early interest rate hikes by the Bank of Japan and concerns over Prime Minister Kishida's expansionary fiscal policies [2][4]. Summary by Relevant Sections Exchange Rate Predictions - JPMorgan has significantly lowered its forecast for the yen, predicting it will depreciate to 156 yen by the end of 2025 (previously 142 yen) and to 152 yen by the end of March 2026 (previously 139 yen) [4]. - Other banks, including Mitsubishi UFJ and Sumitomo Mitsui, have also adjusted their predictions for the yen's depreciation [4][6]. Monetary Policy and Market Reactions - The Bank of Japan maintained its policy interest rate at a recent meeting, with Governor Ueda indicating no immediate plans for rate hikes, leading to increased selling pressure on the yen [5]. - Market sentiment reflects a cautious stance on potential early rate hikes, with a 57% probability of a rate increase in December as of November 7 [6]. Fiscal Policy Concerns - There is growing caution regarding Kishida's "responsible active fiscal" policies, with expectations that the supplementary budget for 2025 will exceed that of 2024, potentially increasing yen selling pressure [7]. - Analysts note that the government appears to tolerate yen depreciation, which has led to a stronger market reaction than initially anticipated [7]. Potential for Yen Appreciation - Some analysts, like Citigroup's Takashima, predict that the yen may appreciate due to stock market adjustments and a reversal of the current depreciation trend, forecasting a rate of 147 yen per dollar by the end of 2025 [8]. Effective Exchange Rate - The nominal effective exchange rate, as measured by the Nikkei Currency Index, reached a low of 71.4 on October 31, indicating a significant depreciation since the last intervention in July 2024 [10].