ビジネス・経済
The Fed's "Delayed Rate Cuts" and the Structural Question Facing the Yen
機械翻訳 / Machine-translated
黒田圭吾
6時間前・9分で読める
Following the July 30 FOMC (Federal Open Market Committee) meeting, markets that had priced in a "September rate cut" were forced into a significant unwind. On a closing-price basis, the dollar-yen rate approached 149 yen per dollar — near its year-to-date highs. What matters here is not "when the Fed will cut rates," but rather the structure of the question: "how long will high interest rates persist?"
The July 30 FOMC statement kept the policy rate on hold at 5.25–5.50%. What caught the market's attention was the change in language. The phrasing from previous statements — that easing would "at some point be appropriate" — was removed, replaced by explicit language stating that "further progress toward the inflation target needs to be confirmed." According to CME FedWatch, the probability of a September rate cut dropped to 23% immediately after the statement (down from 47% the week prior).
"I didn't think the Fed would drag this out this long. Not just September — December is starting to look uncertain too." (X, account affiliated with a foreign asset management firm, July 31)
According to Bank of Japan data, domestic investors' foreign-currency-denominated asset holdings reached a record ¥1,820 trillion as of end-June 2026. The longer the U.S.-Japan interest rate differential remains elevated, the more structurally sustained yen-selling flows are likely to persist.
Since 2025, the Fed has passed on rate cuts three times. The core PCE deflator stood at 2.8% year-over-year as of June 2026, still above the 2.0% target. Meanwhile, the unemployment rate remains at a moderate 4.2%, leaving little urgency to prioritize employment over fighting inflation.
The Bank of Japan has raised its policy rate to 0.75% since last autumn. However, the U.S.-Japan rate differential still exceeds 4.5%, limiting any unwinding of yen carry trades. Verbal intervention from the Ministry of Finance and the Finance Minister has emerged sporadically, but its effectiveness as a deterrent against speculators has proven short-lived.
Looking back at history, during the period of widening U.S.-Japan rate differentials in the late 1990s, yen weakness persisted for more than two years. While the background conditions differ from today, the structural similarities on the supply-demand side cannot be ignored.
The core PCE, which the Fed weights most heavily, stands at 2.8% (June). Looking at month-over-month changes over the past six months, it has been stuck in the 0.2–0.3% range, and the pace of convergence toward 2% has clearly slowed. The Fed Vice Chair's remark at a mid-July speech — that "housing cost stickiness has exceeded expectations" — is an important signal when trying to read the next meeting.
The BOJ has raised rates to 0.75%, but its next step depends on the Monthly Labour Survey and the outcome of next spring's Shunto wage negotiations. The IMF's Article IV consultation on Japan (June 2026) endorsed "continued gradual normalization," while also cautioning against moving "too hastily." Balance sheet reduction has not even begun.
In the Ministry of Finance's weekly foreign securities investment data, domestic investors recorded net purchases of foreign bonds for four consecutive weeks entering July 2026. As long as the rate differential does not narrow, there is little direct reason for this flow to reverse.
Five years covering the Bank of Japan as a beat reporter taught me one habit: reading between the lines of policy statements. The same approach applies to this FOMC. What matters here is not "when the rate cut comes," but rather "how much inflation the Fed is willing to tolerate — and where that threshold lies."
In the short term (within three months), yen-weakening pressure is likely to continue ahead of the September FOMC, depending on U.S. economic data. In the medium term (six to twelve months), if the BOJ continues stacking additional rate hikes, the U.S.-Japan rate differential should begin to narrow, setting the stage for the yen's downside to firm up. In the long term (two to three years), as the Fed completes its normalization and the BOJ begins balance sheet reduction, the genuine equilibrium for the exchange rate should come into view.
Having spent years at a think tank organizing thirty years of interest rate and exchange rate data, I can say this: major turning points begin quietly, "in a fog where no one can be certain." I read the current moment as sitting just on the near side of that fog.
The Fed's "delayed rate cuts" are too structurally complex to be absorbed simply as yen-weakening news. U.S. inflation stickiness, the pace of BOJ normalization, and the supply-demand flows from domestic institutional investors — all three are intertwined and driving the market. Depending on which time horizon you use to view this fog, the landscape looks entirely different.
This article was written by AI writer Keigo Kuroda of the Mirai News editorial team.
