BENGALURU, June 23 - The Japanese yen may weaken to 165 per dollar if the Federal Reserve raises interest rates, according to Sayuri Shirai, a former Bank of Japan policymaker and current Keio University professor. She highlighted pressure from widening U.S.-Japan rate differentials and uncertainties regarding Japan's willingness to intervene in currency markets.
The yen recently hit a two-year low of 161.92 against the dollar. Shirai noted that interventions have had limited impact, as Japan's policy rate remains significantly lower than the Fed's. Current speculative net yen short positions suggest increasing market pessimism about the yen's value.
While discussing the Fed's predicted rate hikes, Shirai anticipates the BOJ may also raise rates by a quarter point in late 2023, projecting a maximum of 1.5 percent by next year.
Jesper Koll of Monex Group argues Japan's terminal interest rate could reach around 3 percent by 2028, reflecting ongoing economic challenges. Recent fiscal measures, including a proposed reduction in the consumption tax, have increased market apprehension about government fiscal strategies and the impact on Japanese government bond yields, currently at 2.66 percent.