The yen ultimately couldn’t hold up, and the exchange rate continued to fall. For the past few months, whenever the USD/JPY rate reached 160, the Japanese government intervened, using its U.S. dollar reserves in an attempt to stabilize the exchange rate. They’ve been continuously selling U.S. dollars and U.S. Treasuries to support the yen—but it’s been completely ineffective. The yen keeps falling; as long as Japan doesn’t raise interest rates, the currency will keep weakening, and inflation and prices will keep rising. The last time Japan raised interest rates, it had little impact on the stock market. The biggest shock came in August 2024. If interest rates are raised this time, capital will likely flee risk assets temporarily for safety. That’s why I haven’t acted yet—I’m waiting until mid- to late June before considering positioning in U.S. stocks. Besides the upcoming FOMC meeting, Japan’s potential rate hike remains the biggest wildcard this month. If they don’t raise rates, their foreign exchange reserves won’t hold out much longer. If they do raise rates, it’s essentially a dampener on Trump ahead of the midterm elections. How Prime Minister Kishida’s government will choose—next week, we’ll find out.