JPY Weakness Persists Amid Japan's Unfunded Tax Cuts

The Japanese yen (JPY) has been experiencing renewed weakness against the US dollar following a recent joint intervention by the US and Japan in FX markets.

Rabobank's Senior Macro Strategist Bas van Geffen points out that despite this intervention, which briefly pushed USD/JPY below 156, the JPY lacks durable support due to Japan's fiscal plans.

The Japanese government has approved a plan to cut the sales tax on food for two years, which will cost around 4 trillion yen (0.6% of GDP) in lost revenues annually.

The government has not specified how it will fund this shortfall, with Finance Minister Katayama pledging to refrain from financing it through Japan's deficit.