The Japanese yen weakened to near 156 per dollar on Thursday, continuing its decline from the previous day. This drop is largely due to growing concerns about Japan’s worsening fiscal situation. The pressure increased after Prime Minister Sanae Takaichi confirmed plans for proactive fiscal spending to stimulate growth and increase tax revenues, sparking fears of escalating public finance strain. Attention is now turning to the Bank of Japan, which has commenced a two-day policy meeting. The bank is anticipated to increase its policy rate by 25 basis points, bringing it to 0.75%, as high food prices continue to push inflation beyond the central bank’s 2% target. Markets will be closely watching Governor Kazuo Ueda’s post-meeting comments for insights on policy direction for the upcoming year, amidst speculation that interest rates may reach 1% by July. Furthermore, the yen's value weakened against the dollar in the lead-up to crucial US inflation data, while Federal Reserve officials remain divided about the potential for additional rate cuts next year.
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