Investors in Tokyo reacted strongly to comments made by US Federal Reserve Chair Jerome Powell on Friday, indicating a potential rate cut at the central bank’s next policy meeting. This led to a sell-off of the dollar in exchange for the yen, as well as a decrease in stocks of Japanese exporters.
Powell’s remarks have raised expectations that the interest rate gap between Japan and the US will narrow, causing the dollar to drop by 2 yen compared to before his speech. The trend continued on Monday, with the yen appreciating to the 143-yen level and prompting investors to sell shares of big Japanese exporters, such as automakers. The benchmark Nikkei 225 also experienced a 0.6 percent decrease, finishing at 38,110.
At the annual economic symposium in Jackson Hole, Powell stated that “the time has come for policy to adjust,” hinting at a potential rate cut at the Fed’s policy meeting in September. Additionally, Bank of Japan Governor Ueda Kazuo emphasized on Friday that the BOJ will not hesitate to raise interest rates if the state of the economy and inflation allows.
Analysts attribute the yen’s strength to concerns over the situation in the Middle East, particularly given the recent exchange of missile strikes between Lebanon’s Hezbollah and Israel. As markets continue to react to these developments, investors in Tokyo are closely monitoring the potential impacts on global financial stability and trade.
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