Last week saw UK CPI decline more than market forecasts.

・Month-on-month: Forecast 0.1%, Actual 0.0%

・Year-on-year: Forecast 4.0%, Actual 3.8%

Following these results, the British pound declined.

Against the dollar, it fell sharply from around 1.3380 to around 1.3310,

while the pound/yen pair plunged from around 203.20 yen

to around 202.00 yen.

Although the likelihood of the Bank of England cutting rates in December has increased, a gradual trend towards a weaker pound is likely to form.

In Japan, the Takaichi administration commenced, with key cabinet ministers holding press conferences. Finance Minister Satsuki Yamaguchi, a figure of interest, advocated for ‘responsible proactive fiscal policy’.

She argued that according to the Domar theorem, if nominal growth exceeds government bond yields, fiscal deficits will not expand, allowing corresponding increases in fiscal spending. Regarding exchange rates and the Bank of Japan’s monetary policy, she maintained a cautious stance, offering no comment.

This likely reaffirmed that maintaining monetary easing alongside proactive fiscal policy remains the core of the Takaichi administration’s approach.

The Nikkei average declined, with a reversal of the Takaichi trade, though the dollar-yen exchange rate remained firm.

Under the Takaichi administration, excessive fiscal spending is being avoided, preventing a situation where government bond yields rise and the yen is sold off. Consequently, a sharp surge is unlikely, but a gradual upward trend seems set to continue, with the Takaichi trade also likely to gradually subside.

There is also a risk of the overvalued Nikkei average undergoing a correction.

This week, Trump’s visit to Japan and the potential US rate cut at the FOMC pose risks to the dollar’s upward trend. However, it remains uncertain whether President Trump will comment on exchange rates, and the FOMC rate cut is largely priced in.

Rather, Governor Ueda’s press conference following the Bank of Japan’s policy meeting could take a dovish tone, making it necessary to establish a short yen position at some point.

Other markets are quiet. US stocks are high, but that doesn’t necessarily mean they will collapse. I want to buy dips in USD/JPY.