Group 1 - The Japanese stock market experienced a significant decline, with the Nikkei 225 index falling below 49,000 points, down over 1,400 points, representing a drop of 2.83% [1] - The Japanese yen continued its weakening trend, with the euro to yen exchange rate surpassing 180 for the first time since 1999, driven by concerns over Japan's deteriorating fiscal situation [3] - Political tensions arising from provocative statements by Japanese Prime Minister Suga Yoshihide regarding Taiwan have negatively impacted consumer sentiment, leading to declines in major companies such as SoftBank Group, Tokyo Electron, and Nintendo [5] Group 2 - Analysts express concerns that deteriorating Japan-China relations could further impact Japan's economy, which is already facing downward pressure, potentially leading to negative growth in the fourth quarter [7] - The South Korean stock market also saw a significant drop, with the KOSPI index declining over 3% [7]

Core Viewpoint - The Japanese yen has depreciated significantly, with a decline of 3% since the end of September, marking the largest drop among 10 major currencies, while the pace of this depreciation is slower compared to previous instances, reducing market concerns about currency intervention [2][4]. Summary by Sections - The yen's depreciation is ongoing, with the exchange rate reaching around 155 yen per dollar, influenced by the strong dollar and the Japanese government's expansionary fiscal policies [4][5]. - The Japanese government is leaning towards fiscal expansion and monetary easing, with discussions about increasing the supplementary budget for 2025 beyond the 13.9 trillion yen planned for 2024 [5]. - The Japanese authorities have not shown a strong intent to intervene in the currency market, with recent statements indicating a recognition of the negative impacts of yen depreciation but lacking urgency for intervention [5][7]. - Market analysts suggest that the authorities may tolerate a yen level around 161 per dollar before considering intervention, as the current volatility is relatively stable compared to past interventions [7][8]. - The market will closely monitor the statements from Japanese officials regarding currency intervention, as expectations of intervention may lead to increased volatility in the yen's exchange rate [8].

Core Viewpoint - The Japanese yen is experiencing significant depreciation, raising concerns about the new government's ability to intervene effectively to support the currency, especially in light of Prime Minister Kishida's signals of a potential slowdown in interest rate hikes [1][2][3] Currency Trends - The yen has depreciated approximately 4.5% against the US dollar this quarter, marking the largest decline among G10 currencies, with the exchange rate reaching around 154.73 [1][2] - The yen's rapid fluctuations have prompted warnings from Japanese officials, indicating a heightened urgency to monitor excessive volatility [1][2] Government and Central Bank Actions - Japan's Finance Ministry previously intervened in the market when the yen fell to around 160.17, with multiple interventions at various levels [2] - Current discussions suggest that if the yen surpasses 155 against the dollar, the likelihood of intervention will significantly increase [2][3] - The Bank of Japan maintained its interest rates in the last meeting, with a decision on the next policy expected on December 19, and a majority of economists anticipate a rate hike by January [2][4] Market Sentiment and Predictions - Analysts suggest that if the yen breaks the 155 mark, verbal intervention may intensify, and the probability of a rate hike by the Bank of Japan could also rise [3] - The market currently estimates a 40% chance of a rate hike by the end of the year, with full expectations for a rate increase not anticipated until April next year [4] Economic Implications - A weaker yen could benefit Japan's export sector by increasing the value of repatriated earnings, but it also raises import costs and inflationary pressures [2] - The potential for intervention may complicate Japan's $550 billion investment plan in the US, which is a key component of the US-Japan trade agreement [3]

Group 1 - The market generally believes that the downward pressure on the US economy will ease, leading to a stronger demand for the US dollar [2][4] - As of late September, the Japanese yen was trading around 147 yen per dollar, experiencing a significant depreciation of over 7 yen in just a month and a half [4] - On November 12, the yen fell to 155 yen per dollar, marking the first time it reached this level in about nine months since February 4 [2][6] Group 2 - The US Senate passed a temporary budget bill on the 10th to end the longest government shutdown in history, with expectations that the House will vote on it soon [4] - There are views that the new Japanese Prime Minister, Fumio Kishida, will implement expansionary fiscal policies, prompting investors to sell the yen against various currencies [4] - On November 12, the yen fell to 179 yen per euro, setting a record low since the euro's inception in 1999 [4] Group 3 - There is speculation that if the yen depreciates beyond 155 yen per dollar, the Japanese government and the Bank of Japan may intervene by buying yen [6] - Japan maintains the lowest policy interest rates among major economies, lacking factors to support yen buying [6] - Future focus may shift to whether Japanese Finance Minister Shunichi Suzuki will increase verbal interventions to curb yen depreciation [6]

Group 1 - Japanese Prime Minister Kishi Nobuo expressed a strong desire for the Bank of Japan to achieve inflation driven by wage growth rather than food price increases, indicating a preference for maintaining low interest rates [1] - Kishi highlighted the risk of returning to deflation, which could lead to delayed consumer spending, harm corporate profits, and suppress wage growth [1] - The government plans to implement a package of measures to alleviate the impact of rising living costs and increase investment in growth sectors to boost corporate profits and consumer confidence [1] Group 2 - The Bank of Japan maintained a 0.5% interest rate but Governor Ueda Kazuo signaled that a rate hike could occur as early as December if companies confirm sustained wage increases [2] - Analysts expect the next rate hike to occur in December or January, with potential delays possibly leading to further depreciation of the yen, increasing import costs and overall inflation [2] - The Japanese core consumer inflation rate reached 2.9% in September, remaining above the Bank of Japan's 2% target due to high food prices, putting pressure on the central bank to raise borrowing costs [2]

Core Insights - Japan's manufacturing confidence has risen to its highest level in nearly four years, driven by a weaker yen and robust orders, with the manufacturing confidence index increasing from 8 in October to 17 in November, the highest since January 2022 [1] - The electronics sector's sub-index surged to 25, marking the highest level since December 2021, indicating strong performance in this industry [1] - The automotive and transportation machinery sectors also saw significant increases, with their confidence index rising from 9 to 27 [1] Industry Analysis - The depreciation of the yen has provided a boost to exports, as noted by an electronics company manager, with the yen falling over 5% against the US dollar during the survey period from October 28 to November 7 [1] - The semiconductor market, particularly in the memory sector, is performing well, contributing to the overall positive sentiment in the electronics industry [1] - Despite the current optimism, there are concerns regarding a potential decline in the overall manufacturing index, which is expected to drop to 15 in February, with some managers expressing worries about sluggish automotive production and sales [1]

Core Viewpoint - Sony Group has raised its consolidated net profit forecast for the fiscal year 2025 to 1.05 trillion yen, an increase of 80 billion yen from previous estimates, driven by the success of the "Demon Slayer" movie and the depreciation of the yen [2]. Group 1: Financial Performance - The expected operating revenue for fiscal year 2025 is 12 trillion yen, with operating profit projected at 1.43 trillion yen, both up by 300 billion yen and 100 billion yen respectively from prior forecasts [4]. - The profit forecast for the ongoing business, excluding the financial sector, is expected to decline by 2% year-on-year [2]. - The impact of U.S. tariff policies on operating profit has been reduced by 20 billion yen, now estimated at 50 billion yen [4]. Group 2: Business Segments - The semiconductor segment has seen the largest upward revision in operating profit, aided by yen depreciation and cost reductions [4]. - The gaming segment has the most significant increase in operating revenue, supported by strong sales of the PlayStation console, although operating profit remains unchanged due to asset impairment losses from sold software [5]. - The "Music" segment, including contributions from the "Demon Slayer" film, has positively impacted operating profit in both Japan and North America [4]. Group 3: Shareholder Returns - Sony announced a stock buyback program of up to 100 billion yen, representing 0.59% of the total issued shares (35 million shares), aimed at improving capital efficiency [4].

Core 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].

Core 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][6]. Group 1: Exchange Rate Predictions - Morgan Stanley has significantly lowered its forecast for the yen, predicting it will depreciate to 156 yen by the end of 2025, down from a previous estimate of 142 yen [6][7]. - Other banks, including Mitsubishi UFJ and Sumitomo Mitsui, have also adjusted their predictions, indicating a general consensus on the yen's depreciation [7]. - The yen depreciated over 4% in October, with a notable drop of more than 7 yen, reaching around 154.5 yen per dollar in early November, marking its lowest point since February [4][6]. Group 2: Monetary Policy and Market Reactions - The Bank of Japan maintained its policy interest rate during the monetary policy meeting on October 30, with Governor Ueda expressing caution regarding future rate hikes [6][8]. - Market sentiment reflects a growing awareness of potential currency intervention by the Japanese government and the Bank of Japan, as the nominal effective exchange rate index for the yen hit a low of 71.4 on October 31 [11]. - Analysts express skepticism about the immediate prospects for yen appreciation, citing a lack of clear support for early rate hikes and the potential for further yen selling pressure due to the government's fiscal policies [8][9]. Group 3: Economic and Fiscal Concerns - Concerns over Prime Minister Kishida's "responsible active fiscal" policies are prevalent, with plans for a supplementary budget expected to exceed the previous year's budget, raising fears of increased yen selling pressure [8][9]. - The market is reacting to the government's perceived tolerance for yen depreciation, with some analysts predicting a reversal in the yen's trend as stock market adjustments occur [9][10].

Group 1 - The core viewpoint is that the expectation of the end of the U.S. government shutdown is increasing, leading to a reduction in risk aversion and accelerating the selling pressure on the Japanese yen [1][2]. - Market participants anticipate that the government shutdown will end by Thanksgiving at the latest, with a possibility of it concluding as early as this week [1][2]. - If the shutdown ends in the first half of this week, it could boost stock prices and further exacerbate the depreciation pressure on the yen [1][2]. Group 2 - During the Japanese trading session, establishing positions for buying USD and selling JPY is challenging due to market caution regarding verbal interventions [1][2]. - Authorities are expected to increase warnings if the JPY/USD exchange rate falls below 155, with actual intervention likely only occurring at the 160 level [1][2].