The FOMC decided to cut rates by 0.25%, but the market seems to have decided that there is little to be said about rate cuts beyond next year.
The dot chart shows two rate cuts scheduled through the end of 2025, but the market expects one to hold at 4%. The neutral rate has also shifted upward, and some participants (Fed President Hamock Cleveland) opposed a rate cut, effectively ending the rate cut.

On the other hand, the BOJ was dovish in its press conference with no policy change. The Bank of Japan was also dovish in its press conference, with no change in policy. Governor Ueda’s speech at the Keidanren was extremely neutral: the dollar rallied sharply after the BoJ policy meeting on January 19, but there were no words to halt the yen’s weakening trend. Basically, the weak yen situation is likely to continue. Will the yen retest the 160-yen mark before the birth of President Trump? There is a limit to how much intervention can be used to deal with an excessively weak yen. Intervention by talk will probably not be effective in the near future.

The Nikkei Stock Average has topped 40,000 yen. Speculators who wanted to avoid the risk of the yen appreciating and stocks falling at the same time had been avoiding the Nikkei because of the possibility of a change in monetary policy by the BOJ, but now that the BOJ has taken a dovish stance, they may have decided to buy the Nikkei. Depending on the trend of U.S. stocks and the dollar-yen, the Nikkei may have created room for a significant rally.

Japan will be closed during the year-end and New Year holidays, and measures such as statements or market intervention to check the yen’s depreciation are likely to be difficult. The U.S. is also in transition to the new Trump administration. Even if Treasury Secretary Yellen says she is OK with intervention, we do not know how the new Trump administration will react.

Therefore, there is a risk that the dollar will rise further during the year-end and New Year markets. We are long the dollar and expect a test of 160 yen.