EBC Markets Briefing | Yen eases on widening trade surplus

The Japanese yen weakened n Tuesday as traders bet that Japan will fall behind a global shift toward higher interest rates, maintaining a wide yield gap with international central banks.

Markets are currently pricing in a 30% probability that the BOJ will hike its interest rate to 1.5% in October, while establishing a roughly 55% chance that the Fed will raise its federal funds window to 4.25%.

Japan recorded a trade deficit for a 4th month in August due to a weak yen. Corporate leaders sound alarms because extreme volatility and high import costs disrupt long-term business planning.

Policymakers face a delicate balancing act, as moving too quickly on rate hikes risks economic stagnation and questioning its independence, while acting too slowly could undo the recent success of stabilizing the yen.

The Bessent-backed currency intervention has likely made it harder for the government to oppose BOJ tightening, according to around 80% of economists in a Bloomberg survey.

PM Takaichi is boosting fiscal spending despite that rising interest rates threaten to escalate borrowing costs. Japan's debt-servicing expenses already on track to surge by approximately 30% by 2029.

EBC Financial Group analyst says a decisive push above 157.43 per dollar could shift structural favour back to the bears, opening the door toward the psychological resistance of 159–160 per dollar.

Asset Recap

As of market close on 21 September, among EBC major products, Intel shares led gains. CNBC suggests that renewed interest in CPU makers' shares may be linked to attention surrounding Meta's Muse personal agent application.

Crude oil prices dropped for the fourth straight day as supply anxieties eased, driven by smoother shipping traffic through the Strait of Hormuz and renewed hopes for diplomatic talks regarding the Iran conflict.

The Nasdaq 100 hit an all-time high, propelled by rallies in leading AI companies, while Treasury yields fell back from their recent peaks. Brief pullbacks in stocks continued to be met with selective dip-buying.

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EBC Financial Group Disclaimer: This material is for general information purposes only and is not intended as (and should not be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by EBC Global Financial Collaboration or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.