2026.01.0701:57:52UTC+00Japanese Yen Slips Amid China Tensions

The Japanese yen continued its downward trend, depreciating beyond 156.5 per dollar on Wednesday, marking its second consecutive session of losses. This decline was influenced by escalating geopolitical tensions with China, notably after Beijing implemented export restrictions on military-applicable products to Japan. This move was in response to comments made last year by Prime Minister Sanae Takaichi regarding Taiwan. The export controls pertain to a spectrum of items, including electronics, sensors, and technology relevant to the shipping and aerospace sectors. Despite these circumstances, wider geopolitical risks, such as the latest U.S. involvement in Venezuela, had a muted effect on currency markets. Domestically, investors remain optimistic that the Bank of Japan will pursue further interest rate hikes later this year. This follows assurances from Governor Kazuo Ueda that any policy shifts will be contingent on economic and price trends aligning with the central bank’s projections. He also conveyed optimism about the economy maintaining a positive cycle of increasing wages and prices.