The yen appreciated by more than 4 yen at once, and the Nikkei Stock Average fell sharply for a while. The destructive power of the dovish remarks of the US Fed = Federal Reserve Chairman Powell was considerable. At the last FOMC = Federal Open Market Committee meeting of the year, the participants of the meeting presented their interest rate forecasts, and it was predicted that the number of rate cuts will be at least three times next year and 2024.
When will interest rate cuts start? And will next year be the "Year of the Strong Yen"?
(Washington bureau reporter Takuya Odajima)

Shock! Dove-colored Chairman Powell

"The policy rate may be close to its peak," "We are aware of the risk of maintaining [high interest rates] for too long,"
"The question of when it is appropriate to revert to monetary tightening is on the horizon and we discussed it at today's meeting."

This is the statement made by Fed Chairman Jerome Powell at a press conference that began at 12:14 a.m. on December 4, Japan time.

Since the summer of 2022, I have been stationed in Washington, D.C., and have listened to Chairman Powell's press conferences and speeches many times, and have repeatedly read the transcript of his remarks to find out the intentions behind them, but this is the first time that he has made such a series of "dovish" remarks.

It was a shocking change.

By the way, hawkish and dovish have the following meanings in financial terms.

Hawkish: Bullish view on the economy Prioritizes inflation control, aggressive interest rate hikesDovish
: Considers the economy, is accommodative in monetary policy, cautious in raising interest rates, and aggressive in lowering interest rates

Dovish "intervention" of 4 yen or more is "free"

Following the Fed's decision and Chairman Powell's remarks, the yen's appreciation accelerated in the foreign exchange market.

Before the Fed results were announced, the dollar was around 1 dollar = 145.10 yen, but 8 hours later, in the early afternoon Japan time, the yen strengthened by more than 1 yen to 140.95 yen, and the dollar weakened.

Ministry of Finance, Finance Minister Kanda

When the yen depreciated in September 2022, the government and the Bank of Japan intervened in the market, but even at that time, the yen depreciated by more than 9 yen in a short time.

However, 5.2 trillion yen was spent on market intervention at this time.

Chairman Powell's dovish remarks, so to speak, "dovish intervention" did not cost money, but it was extremely effective.

Market participants point out that it may have been the Fed's "turnaround" that the government and the Bank of Japan had been waiting for.

The reasons for the dovish remarks are:

Why was Powell so dovish?

The reasons for this can be summarized in two ways:

2. A series of economic indicators showing a slowdown in inflation 1.
The economy is starting to show signs of slowing down.

Since March last year, the Fed has sought to cool the economy and contain inflation by tightening monetary policy, including interest rate hikes, so there is a glimpse of confidence that it is an ideal development.

What can you read from a dot chart?

Above all, the market focused on the outlook for the policy rate by the participants.

This is an economic outlook called SEP (Summary of Economic Projections), and all 19 members of the FOMC submit their projections as if they were votes.

The outlook for the policy interest rate, which attracts particular attention, is also called a dot chart, in which each member's forecast is indicated by a dot (= dot).

In this dot chart, the median interest rate forecast by members at the end of next year is 4.6%.

Assuming a range of 1.0% per rate control, we can expect at least three rate cuts in 25.

Among the members, there were two who expected no rate cuts at all, but there were six who saw one rate cut, five who cut rates twice, and six who cut rates three times.

In addition, there are four rate cuts of ▼ 2024 times, ▼ 3 rate cuts (2 person), and no one expects a rate hike.

It signals that the rate hike phase is over.

When will interest rate cuts begin?

So, when will the rate cuts begin? That's the biggest concern of the market.

In this regard, Chairman Powell did not indicate a timing, but as he indicated at the outset, he made it clear that he discussed the timing of the start of the rate cut.

There is a growing view in the market that the Bank will start cutting interest rates as early as March next year, and that it will cut interest rates four to six times in one year next year, and there is an expectation that next year will be a "year of yen appreciation" due to a narrowing of the interest rate differential between Japan and the United States.

There are also people who are taunting the market

However, there are those who blame the market for expecting too much of a rate cut.

One of them is Alan Blinder, a former vice chairman of the Fed and a professor at Princeton University.

Alan Blinder, former Vice Chair of the Fed and professor at Princeton University

Chairman Powell and I are old friends who have discussed monetary policy.

Professor Blinder said:

"If I were to make a gamble, I would bet on a rate cut in the second half of 2024," he said, adding, "Chairman Powell is a cautious person, and if he were in the chair, he would be more cautious."

Is Japan leveling the ground?

Another important factor in looking at stock prices and the yen is the movement of the Bank of Japan.

In a speech on December 1, BOJ Deputy Governor Himino acknowledged that there are positive aspects to rising interest rates.

The next day, on the 12th, Governor Ueda said at a meeting of the House of Councillors' Committee on Fiscal and Monetary Policy, "I think it will be even more challenging from the end of the year to next year," and the market perceived that the Bank of Japan had begun to prepare the ground for an exit in earnest.

BOJ Deputy Governor Himino (left) Governor Ueda (right)

The mystery remains as to why Governor Ueda said "from the end of the year" and what his true meaning is, as the English word "challenging" also means "many challenges" and "difficult."

On December 12, the results of the Bank of Japan's monetary policy meeting will be announced, and Governor Ueda will hold a press conference.

It's a bit early to predict the market in 19, but if the Fed's monetary policy changes from "hawk" to "dove" and the BoJ's policy also changes, the market may move differently.


Toshiba's shares will be delisted in 20 days.

Under the fund, it will become an unlisted company and will try to rebuild its management.