Last week was a “risk-off” market as the U.S. government shutdown began over the debt ceiling issue.
Most recently, there were U.S. government shutdowns from October 1-16, 2013 and from December 22, 2018 to January 25, the following year, but in past cases, both Republicans and Democrats were trying to avoid a prolonged shutdown.
This time, however, both sides believe that their side has the advantage, and the problem is that there is no clear path to an agreement.

As a result, the dollar has softened to around 147.53 yen, with selling of the dollar mainly by overseas investors.
The dollar has certainly sold off a bit during past U.S. government shutdowns, but that is not the only reason.

The ADP employment report showed that employment is worse than expected.
The ADP employment report would not have attracted much attention in the past, but the importance of the ADP will increase if it is no longer released by the U.S. government.

Above all, President Trump has said that he will lay off federal employees who have been furloughed, and if this really leads to unemployment, the impact will be enormous.
Basically, the situation should be resolved within a month or so, but if it drags on, the risk-off phase is likely to continue due to distrust of the U.S. government and governing structure.

In Japan, Bank of Japan Deputy Governor Uchida delivered a speech at the National Securities Conference, in which he maintained his previous position, but said that “uncertainty has receded” due to the agreement reached in the Japan-US negotiations regarding US tariffs.
Considering that Vice Governor Himino said that the impact of the tariffs would be stronger in the future and that the uncertainty was strong, this was a step forward.

Governor Ueda also made a speech, but like Vice Governor Uchida the day before, he remained cautious and did not offer any hints of a rate hike at the October meeting.
Regarding the impact of the tariffs, he said that the uncertainty had receded, but that the 15% tariffs would be a significant burden on businesses in their own right and would slow growth in the global economy.
If that is the case, a rate hike by the end of the year appears almost unlikely. It is now difficult to see any reason from the Japanese side to see a path toward a stronger yen.

Essentially, the direction of U.S. monetary policy going forward is important, and it would be better not to get too caught up in the technicality of the U.S. government agency closures.
However, one never knows when and if a dramatic “agreement” will be reached. In that case, a sense of relief is likely to lead to a little “risk-on.