At the FOMC press conference, US Federal Reserve Chairman Powell showed no sign of deference to the Trump administration, causing US interest rates and the dollar to rise.
President Trump had said, ‘I hear there will be an interest rate cut in September,’ but Powell clearly stated, ‘Nothing has been decided yet.’ Although this statement was only natural, it can be said that it met the market’s expectations for Powell to show resolve.

On the other hand, Governor Ueda remained dovish throughout the Bank of Japan’s policy meeting. The other day, the representative secretary of the Shinano Economic Association pointed out that ‘the Bank of Japan should raise interest rates immediately’ and ‘the governor is responsible for the economic downturn,’ saying that the prolonged yen depreciation due to the lack of interest rate hikes is leading to soaring prices for imported foods. However, Governor Ueda was extremely cautious about raising interest rates.
Even though an agreement has been reached on tariff negotiations, there are still many countries that have not reached an agreement, and the impact on the global economy as a whole is still unknown, so it is unlikely that any immediate action will be taken. However, based on the press conference as a whole, I did not sense any intention on the part of the Bank of Japan to protect the value of the yen.

The announcement of an agreement between Japan and the United States in trade negotiations led to a reaction in the direction of yen appreciation, but there were also reports that Prime Minister Ishiba would resign, which led to a reaction of more than 1 yen depreciation, and then the resignation reports were denied, resulting in a flurry of activity.
If Ishihara were to resign, the market would be completely different depending on who becomes the next Liberal Democratic Party (LDP) president. Currently, Takagi, who is the farthest from Ishihara, is the most likely candidate for president.

If Ms. Takagi becomes Prime Minister and LDP president, she would clearly pursue monetary easing and expansionary fiscal policy, leading to a weaker yen. On the other hand, if her strong rival, Mr. Koizumi, becomes Prime Minister and LDP president, fiscal and monetary policy would be more balanced, leaving no clear direction.

However, for the time being, Mr. Ishihara is expected to remain in office and fulfil his duties, and given that the tariff negotiations were settled at an unexpectedly low rate of 15%, it would not be surprising if the yen were to strengthen slightly. We recommend a short-term sell strategy for the dollar-yen and cross-yen pairs.
While the decline in the euro-dollar exchange rate has been the main driver of the dollar’s rise, the focus may shift to the dollar-yen pair.