Japanese Stocks Rise as Yen Weakens

Japanese stocks rose as the yen weakened after Federal Reserve Chair Jerome Powell cautioned against assuming large rate cuts will continue. Investors are awaiting the Bank of Japan’s decision Friday.

The yen weakened more than 1%

The yen fell over 1% to 143.74 per dollar after strengthening to 140.45 following the Fed's decision to cut its benchmark interest rate by half a percentage point. During a press conference after the announcement, Powell indicated that the Fed is not in a hurry to ease policy further. The Federal Reserve lowered the benchmark rate by half a percentage point on Wednesday; however, Chair Jerome Powell warned that this should not be interpreted as a new trend in policy easing.

“For Japanese equities, it was probably the ideal outcome that there was a large rate cut as expected but the yen didn’t appreciate,” said Rina Oshimo, a senior strategist at Okasan Securities Co. “Since the BOJ decision is expected to remain unchanged, attention is likely to focus on Governor Ueda’s subsequent remarks.”

The USD/JPY currency pair continues to move within a corrective phase and a descending channel. At the time of this forecast, the exchange rate is 141.70. Moving averages indicate a short-term bearish trend for the pair, with prices having fallen below the signal lines, suggesting selling pressure on the U.S. Dollar and the potential for further declines.

For September 19, 2024, we can expect an attempt at price growth, testing the resistance area near 143.05. Following this, a downward rebound is likely, leading to a continuation of the USD/JPY pair’s decline to below the 134.15 level.

A weaker yen benefits Japanese exporters by making their products more competitively priced in global markets and enhancing their overseas earnings when converted back to yen.

Japanese Stocks Rise

Tokyo's Nikkei led Asian markets higher Thursday as the yen hit a two-week high after the Federal Reserve announced a bumper interest rate cut and pledged a series of further reductions that boosted sentiment. Japanese auto stocks climbed early Thursday as the yen weakened against the dollar amid expectations that the Federal Reserve may implement smaller rate cuts moving forward. The index for Japanese auto shares increased by 4.1% in morning trading, with the yen trading around 143.60 to the dollar. Toyota Motor saw its shares rise by 5.1%, while Honda Motor gained 4.2%.

"Japanese stocks are undervalued and are likely to see significant long-term growth," said Masayuki Kubota, a strategist at Rakuten Securities, recommending that investors continue buying Japanese shares.

Economists expect the BOJ to stand pat when its two-day meeting concludes Friday. Japanese stocks tumbled into a bear market in early August after BOJ’s rate hike and Governor Kazuo Ueda’s hawkish stance at his briefing sent the yen higher.

“Export-related stocks are rebounding on a sense of relief and security that the FOMC’s results did not lead to a stronger yen,” said Tomo Kinoshita, a global market strategist at Invesco Asset Management Ltd. Still, investors are still cautious ahead of the BOJ decision, making it difficult to take on large positions, he said.

When considering shares, indices, forex (foreign exchange) and commodities for trading and price predictions, remember that trading CFDs involves a significant degree of risk and could result in capital loss.

Past performance is not indicative of any future results. This information is provided for informative purposes only and should not be construed to be investment advice.