Japan's fight with yen bears dulled by Takaichi's doves

Economic

Summary:

Japan’s yen defense is weakening as PM Takaichi backs pro-stimulus advisers who tolerate a weaker currency. Markets expect slower BOJ hikes, making intervention unlikely unless the yen slides beyond 160–165 per dollar.

As Japanese authorities once again battle a slide in the yen, their efforts this time are struggling for traction, undermined by new prime minister Sanae Takaichi's promotion of advocates of big fiscal and monetary stimulus to key posts.

While Tokyo officials this week warned against sharp downward moves in the currency, maintaining the jawboning of previous administrations, their voices are increasingly competing with calls by new policy advisers preaching the benefits of a weak yen.

A proponent of expansionary fiscal and monetary policy, Takaichi filled seats in key government panels with advocates of big spending backed by low interest rates - policies that work to depreciate the yen's value.

For one, Takuji Aida, an economist who joined a panel on the government's growth strategy, stressed the benefits of a weak yen such as easing the blow to manufacturers from U.S. tariffs.

The reflationists' sanguine view on the weak yen contrasts with the concerns of previous administrations, who primarily focused on cost of living pressures caused by the currency's impact on imported inflation.

"The Takaichi administration hasn't escalated its warning, which suggests it is tolerating a weak yen," said Masafumi Yamamoto, chief currency strategist at Mizuho Securities.

"Given the administration doesn't seem to prioritise combatting a weak yen, it would take a slide below 155 per dollar for it to escalate verbal warnings and a fall below 160 to contemplate direct intervention in the market," he said.

To be sure, Finance Minister Satsuki Katayama warned on Wednesday that authorities were vigilant to "one-sided, sharp moves" in the exchange-rate market, adding the negative aspects of a weak yen have become more pronounced than the positives.

But the remarks failed to prop up the yen as they were short of more direct threats of currency intervention, such as that authorities were ready to take "decisive action."

Underscoring a lack of consensus within the administration, economic revitalisation minister, Minoru Kiuchi, said last month the weak yen had benefits to growth. On Tuesday, he said the boost to import costs from a weak yen was fading.

Such views have also helped fuel market expectations the Bank of Japan will be forced to go slow in raising interest rates, pushing the yen to a record low against the euro and a nine-month trough versus the U.S. dollar.

The dollar has risen about 5% against the yen since Takaichi won the ruling party's leadership race on October 4. It stood around 154.50 yen on Friday, after breaking a key milestone of 155 earlier this week.

INTERVENTION HURDLE HIGH

Japan last intervened in the currency market in July 2024 when the yen fell to a 38-year low of around 161.96 to the dollar. The BOJ also raised interest rates to 0.25% that month, causing the yen to strengthen to around 150 per dollar.

Such concerted action highlighted the concern then-premier Fumio Kishida had about a weak yen.

By contrast, Takaichi and her reflationist aides are fans of "Abenomics," a mix of big spending and bold monetary easing deployed in 2013. The policies helped reverse sharp yen rises blamed for prolonging deflation and economic stagnation.

Now, a weak yen has become a pain point for an economy that relies heavily on fuel and food imports. Yen declines have kept inflation above the BOJ's 2% target for well over three years, causing grumblings from households hit by rising living costs.

Mindful of broadening inflationary pressures, BOJ Governor Kazuo Ueda signaled the chance of a hike as soon as next month.

But Takaichi and her finance minister both made clear their displeasure over a near-term rate hike, saying Japan has yet to see inflation durably achieve the BOJ's target.

Almost a year since its last rate hike in January, investors have taken comfort in selling yen on prospects the BOJ is unlikely to hike steadily at a set pace.

"There's a higher chance than initially thought that Takaichi's administration would favour reflationary policies," said Ryutaro Kono, chief Japan economist at BNP Paribas.

"Given the administration's policy stance as suggested by the recent personnel appointments, it's hard to project the BOJ accelerating its pace of rate hikes," said Kono, who now expects the bank to hike twice next year instead of three times.

If BOJ rate hikes were put on hold, the only remaining tool to counter yen falls would be currency intervention.

But getting consent from Washington may be tough as U.S. Treasury Secretary Scott Bessent has repeatedly signaled that rate hikes are the best way to prop up the yen.

Former BOJ official Toru Sasaki expects Japan to hold off intervening unless the yen falls below 165 to the dollar.

"Conducting yen-buying intervention at a time Japan's real interest rates remain deeply negative would be wasting foreign reserves."

Source: reuters

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Devin

Economic

The United States will slash its tariffs on goods from Switzerland to 15% from a crippling 39% under a new framework trade agreement, the Swiss government said on Friday.

The announcement followed U.S. Trade Representative Jamieson Greer saying a deal between the two countries had been reached, adding that details would be announced later on Friday.

Richemont Chair Johann Rupert, who met President Donald Trump in the White House last week as part of a delegation of Swiss business executives, earlier had said he thought the punitive tariffs imposed by Washington were the result of a "misunderstanding" that would be cleared up quickly.

"The Swiss and the Americans are very much the same -- independent, don't like big government etc. etc., so I think this misunderstanding will be cleared up this week," Rupert told reporters after Richemont reported its latest results.

"I think we will hear more, from what I've gathered, we'll hear something today," Rupert said.

Swiss Economy Minister Guy Parmelin returned home on Friday after talks with Greer in Washington, saying: "We clarified virtually everything."

Parmelin declined to provide details of the discussions but said there would be further communication when everything is "finally clear."

The government gave no new details on Friday.

A Swiss source, speaking on condition of anonymity, said after the Thursday meeting that a deal had effectively been reached.

A senior U.S. official said the meeting was "very positive."

Richemont's Rupert met Trump last week to discuss the impact of tariffs, along with executives from MSC, Rolex, Partners Group, Mercuria, and MKS.

The meeting helped thaw relations with Washington, Swiss media reported, and Trump said earlier this week he was working on a deal to lower the tariffs on goods from Switzerland.

Rupert said it could be months before a deal is signed.

"It's dependent on President Trump, who's a very busy man. Our situation in Switzerland is one of the things he has to deal with," he said.

Swiss industry on Friday reported a 14% fall in exports to the U.S. during the three months to the end of September, technology industry association Swissmem said, while machine tool makers saw shipments slump 43%.

A potential reduction in tariffs to 15% would stabilise the Swiss economy, Rupert said, and prevent job losses caused by the higher duty.

"It's not only us," he added. "It's potentially devastating for the whole of Switzerland."

Source: Asia_Nikkei

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Winkelmann

Stocks

Economic

Key points:

· Case involves fatal crashes in 2018 and 2019 that killed 346 people

· Boeing had agreed to plead guilty during Biden administration

· Judge said he had no authority to reject deal struck under Trump administration

Families of some victims of two Boeing737 MAX plane crashes that killed 346 people asked a U.S. appeals court on Thursday to reverse a judge's decision to approve the Justice Department's request to dismiss a criminal case against the planemaker.

Judge Reed O'Connor, of U.S. District Court in Fort Worth, Texas, last week approved the request by the Trump administration's Justice Department, but harshly criticized the government's decision.

He said he did not agree that dismissing the case, which had been pursued under the Biden administration and initially resulted in an admission of guilt, was in the public interest.

The families asked the 5th Circuit Court to reverse his decision. They said the Justice Department violated their rights as crime victims when it negotiated a deferred prosecution deal with Boeing over a fraud charge stemming from false representations the planemaker made to the Federal Aviation Administration.

"We believe that the courts don't have to stand silently by while an injustice is perpetrated," said Paul Cassell, a lawyer for some of the families. "The charges against Boeing cannot simply be dropped."

Boeing did not immediately respond to a request for comment on Thursday. The Justice Department last week rejected the judge's criticism and said it believed the deal was "the most just outcome."

O'Connor said in 2023 that "Boeing's crime may properly be considered the deadliest corporate crime in U.S. history."

He said he had no authority to reject the government's decision to make a deal with Boeing, even though it "fails to secure the necessary accountability to ensure the safety of the flying public."

Boeing last year had agreed to plead guilty to a criminal fraud conspiracy charge after the fatal 737 MAX crashes in Indonesia and Ethiopia in 2018 and 2019.

After U.S. PresidentDonald Trumptook office, the Justice Department reversed course in May and dropped the demand for a guilty plea.

Under the deal, Boeing agreed to pay an additional $444.5 million into a crash victims' fund to be divided evenly per victim of the two fatal 737 MAX crashes, on top of a new $243.6 million fine and more than $455 million to strengthen the company's compliance, safety, and quality programs.

In September, the FAA proposed fining Boeing $3.1 million for a series of safety violations, including actions tied to a January 2024 Alaska Airlines 737 MAX 9 mid-air emergency, and for interfering with safety officials' independence.

Separately, a jury in Chicago on Wednesday ordered Boeing to pay more than $28 million to the family of Shikha Garg, a United Nations environmental worker who was killed in the crash in Ethiopia. Under a deal between the parties, the family will receive $35.85 million - the full verdict amount plus 26% interest - and Boeing will not appeal.

Source: TradingView

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Adam

Commodity

After 43 days, the U.S. government is back in business, and while the end of the longest government shutdown in history has improved geopolitical sentiment, it has done little to stifle gold’s bullish momentum.

The yellow metal continues to see a solid recovery from last month’s sharp selloff. Spot gold is holding new support at $4,200 an ounce.

Although geopolitical uncertainty has diminished slightly, one analyst expects the focus to shift to a much bigger problem: the U.S. government’s unsustainable debt, which continues to rise as President Donald Trump shows himself to be another spendthrift politician.

Trump has once again made headlines as he promises to send Americans $2,000 checks using money raised from elevated tariffs. He has also promised $10,000 bonuses for “patriot” air traffic controllers. Trump has further floated the idea of creating 50-year mortgages.

Nicky Shiels, Head of Research and Metals Strategy at MKS PAMP, said this fiscal environment is positive for hard assets like gold and silver.

“All this is simply bringing forward stimulus to the broader economy, because the administration understands parts of the economy are slowing; it’s a preview of what's to come (stimulus) into midterms. Trump is going to run the U.S. hot at the expense of deficits & the US’ fiscal state into Nov ’26, because they must pivot more populist following recent election results,” she said in a note.

The U.S. government already has difficulty selling its debt. This week, the U.S. Treasury saw weaker-than-expected participation in both 10-year and 30-year bond auctions. Analysts note that 30-year bond sales have been soft for most of this year.

Shiels said that Trump’s 50-year mortgage idea could be the most problematic. While American consumers would have lower monthly housing costs, the interest on a 50-year mortgage would be nearly double.

“Essentially, it's just an IOM, effectively just renting a place from the bank, and importantly, it might be a path to the 50yr Treasury bond and terming out the debt,” she said.

Looking ahead, Shiels said that all this financial market uncertainty could continue to support gold and silver prices, and investors might even see a Santa Claus rally into the new year.

Source: kitco

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Olivia Brooks

Political

Economic

Kansas City Federal Reserve President Jeffrey Schmid indicated Friday that he might dissent again at the Fed's December meeting if policymakers decide to cut interest rates further, citing persistent inflation concerns that extend beyond tariff impacts.

Schmid was one of two officials who opposed the Fed's October decision to lower the policy rate by a quarter percentage point to the 3.75%-4.00% range. In his remarks at an energy conference in Denver co-hosted by the Dallas and Kansas City Fed banks, he explained his position.

"I view the current stance of monetary policy as being only modestly restrictive, which is about where I think it should be," Schmid said, reiterating his belief that cooling in the U.S. job market stems from structural changes that lower interest rates cannot address.

The Kansas City Fed president expressed concern that additional rate cuts could undermine the Fed's 2% inflation target. "This was my rationale for dissenting against the rate cut at the last meeting and one that continues to guide my thoughts as I head into the meeting in December," he stated, while noting his final decision would depend on upcoming economic data.

Schmid emphasized that his inflation worries go beyond tariffs. "Though tariffs are likely contributing to higher prices, my concerns are much broader than tariffs alone," he said, pointing to uncertainty about when and how businesses will pass higher costs to consumers.

Several Fed policymakers have voiced similar inflation concerns since the October meeting, creating tension with those who fear the labor market could deteriorate without further rate cuts. This division suggests the December 9-10 meeting will involve intense debate.

Schmid also warned about inflation expectations, saying the Fed has "no room to be complacent" and that "persistent inflation can shift the psychology around price-setting, and inflation can become ingrained." He cautioned, "It is unlikely that we will still be talking about soft landings in that situation."

Source: Investing

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Adam

Bond

Not that long ago, bond yields were rising as concerns over deficits, inflation, and a series of bad Treasury auctions were paraded through the media. We bring this to your attention as the 10-year Treasury auction on Wednesday was on the weaker side, yet the bond market reaction was minimal.

Additionally, government deficits are just as problematic today as they were in May when the 30-year Treasury bond hit 5.15%. In May, when yields were peaking and bond market narratives, such as the bearish bond sentiment, were spreading fear of much higher yields, year-over-year CPI was 2.37%. Today it’s a touch over 3%.

Since May, bond yields have fallen by about half a percentage point, yet inflation has moved higher, and there doesn’t seem to be an end to excessive government spending. Furthermore, the Fed has been conducting QT, which drains liquidity and leaves the supply of Treasury bonds higher than it would otherwise be. What this tells us is that the bearish bond narrative has lost its steam. As we wrote in January:

Bond investor sentiment does impact yields and can be relatively accurately quantified, unlike the stock market. In bond market parlance sentiment is called the “term premium or discount.”Quantifying the term premium or discount and, equally important, understanding the market narratives responsible for the premium or discount is valuable.

With such knowledge, one can assess whether the narratives make sense. Thus, is the premium or discount likely to be sustained? If the narrative(s) are illogical, there could be an opportunity to profit when the premium or discount normalizes.

The graph below shows that the term premium (purple) has steadily declined, suggesting the narrative, particularly the bearish bond sentiment, is less impactful than it was.

The Big Short Shuts Down

Michael Burry, famed for predicting the 2008 housing/subprime crash and his likeness played a lead role in Michael Lewis’s book and movie The Big Short, is exiting his hedge fund, Scion Asset Management. Recently, he deregistered with the SEC and sent the letter below to his clients.

Scion only managed $155 million as of their last reporting date. While his hedge fund was small, his social media presence was significant. Recently, Burry has been pointing out that the depreciation periods some of Nvidia’s (NASDAQ:NVDA) clients are taking for their chips are much longer than the chips’ useful lives.

Doing so inflates earnings by decreasing expenses. Per Benzinga, he estimates that Oracle’s (NYSE:ORCL) profits could be overstated by 26.9% and Meta’s (NASDAQ:META) by 20.8%. Furthermore, he recently hinted at more details in a forthcoming disclosure on November 25 amid his broader bearish bets, including short positions on Nvidia and Palantir (NASDAQ:PLTR) and a discussion of bond issuance by Meta and Google (NASDAQ:GOOGL).

Healthcare Stocks Rebound: Which Sector Is Next?

For a good chunk of this year, healthcare stocks lagged the broader S&P 500. In fact, on July 22, we wrote a Commentary titled Will The Healthcare Sector Be The Next Rotation? In that article, we wrote:

As shown below, the P/E ratio of the healthcare sector compared to the S&P 500 is the lowest it has been in the last 30 years. Moreover, its absolute P/E is in the lower third of readings over the past 30 years. The sector is also very cheap and very oversold on a shorter-term technical basis.

The answer to our article is yes, healthcare stocks have recently rotated into favor. The table below shows the relative performance of each sector versus the S&P 500 over the last 10 days and in 90-day increments going back to late 2024. As shown, healthcare stocks have outperformed the market by 6.72% over the last 10 days.

Further, the graphic below the table shows that recent buying in healthcare has brought its absolute score to .90, which is a very overbought level. While the sector may consolidate on both relative and absolute terms, it still has significant room to catch up with the broader market. Compare the recent 10-day returns in the table to the prior three sets of 90-day returns for context.

Are the staples, financial, or energy sector next to follow the healthcare lead and play catch-up?

Source: investing

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Justin

Economic

When the White House makes a promise about distributing benefits to Americans, it's hard to remove politics from the equation, regardless of who is president. So when President Donald Trump recently promised a $2,000 "dividend" for most Americans, analysts and journalists immediately began parsing out exactly what that meant, and why he said it.

Although details are still sketchy, the $2,000 dividend could potentially affect your 2026 tax return in a number of different ways. Here's a look at exactly what the president said, how the dividend may play out and what it could mean for your taxes.

What's the Origin of the Dividend Promise?

Beginning on Nov. 9, President Trump made a series of posts on social media platform Truth Social regarding the dividend. Specifically, Trump declared, "People that are against Tariffs are FOOLS! We are now the Richest, Most Respected Country In the World, With Almost No Inflation, and A Record Stock Market Price. 401k's are Highest EVER … A dividend of at least $2000 a person (not including high income people!) will be paid to everyone."

What Are the Specifics?

While this might sound great on paper, Trump offered little by way of detail. As of Nov. 13, there still has been no clarification of who counts as "high income," which Americans would qualify for this "dividend," and how or when it would be paid.

Treasury Secretary Scott Bessent seemed to walk back the thought of distributing actual dividend checks when he told ABC News' "This Week" that "It could be just the tax decreases that we are seeing on the president's agenda. No tax on tips, no tax on overtime, no tax on Social Security, deductibility on auto loans. Those are substantial deductions that are being financed in the tax bill."

According to ABC News, on Nov. 12, White House press secretary Karoline Leavitt told reporters at the White House, "The president made it clear he wants to make it happen. So his team of economic advisers are looking into it."

Put it all together, and as of Nov. 13, it's not at all clear how or even if the $2,000 dividend will come about.

Does the Math Work Out?

According a post from Erica York, vice president of federal tax policy at the Tax Foundation, handing out $2,000 cash to the bulk of the U.S. population could cost $300 billion or more — an amount that would exceed the net revenue brought in so far from Trump's new tariffs. And it's entirely possible that the tariffs could go away, or even be retroactively deemed illegal, by the Supreme Court of the United States, according to AP News.

This is likely the reason Bessent sidestepped the idea of actual dividend checks going to Americans. If the $2,000 is cloaked in other deductions or tax breaks as he suggested, the administration could likely sidestep cash payouts.

Assuming It Passes, What Could It Mean for Your Taxes?

If everything falls into place and Americans actually receive some form of $2,000 dividend, here are some of the ways it could play out for your taxes.

If paid in the form of a "stimulus check," like the ones issued during the pandemic, they will likely be nontaxable. This means your tax liability will not increase, and the money paid to you will not push you into a higher tax bracket.
If issued as a tax credit, it will reduce your tax liability by the amount of the payout, potentially $2,000. If you don't owe $2,000 in taxes, any excess amount would come in the form of a tax refund. This amount would also be nontaxable.
If used as some type of deduction or exemption from taxes, whatever benefit you receive would also be nontaxable. For example, if the $2,000 comes in the form of an exemption from auto loan interest, it simply means you won't have to pay as much on your car loan.

Overall, President Trump's offer of a $2,000 dividend to low- and middle-income Americans certainly sounds attractive on the surface. But as of mid-November, there's still no real clarity on where the money will come from, who it will go to or whether it will actually happen. The best course of action right now is to keep an eye on the news to see when — or if — the policy is actually implemented.

Editor's note on political coverage: GOBankingRates is nonpartisan and strives to cover all aspects of the economy objectively and present balanced reports on politically focused finance stories. You can find more coverage of this topic on GOBankingRates.com.