Recent forecasts for the INR to JPY exchange rate indicate a significant influence from both domestic and international factors. The Indian Rupee (INR) is facing downward pressure primarily due to the U.S. imposing a 25% tariff on Indian exports, effective August 27, 2025. This tariff, exacerbated by India's ongoing Russian oil purchases, has led to a depreciation of the INR to near-record lows. Just recently, the RBI held interest rates steady at 5.50% as it acknowledged risks stemming from these tariffs, projecting a potential 0.3% reduction in GDP growth.
The INR's value is further weakened by sluggish manufacturing exports and a narrowing policy rate differential with the U.S., as highlighted by analysts. The global economic uncertainty, particularly related to U.S. Federal Reserve monetary policy, continues to play a crucial role in determining currency stability for the INR.
Conversely, the Japanese Yen (JPY) is influenced by its own set of challenges, particularly political uncertainty surrounding Prime Minister Shigeru Ishiba and the potential implications for fiscal policy and interest rate adjustments. While the Bank of Japan considers resuming interest rate hikes amid inflationary pressures, external risks, including U.S. tariffs on Japanese goods, add complexity to the JPY’s outlook.
As per recent market data, the INR to JPY exchange rate is hovering near 7-day lows at 1.6808, which is close to 0.6% below its three-month average of 1.6917. This suggests a relatively stable trading range of 4.2% over recent weeks. The JPY's performance is compounded by global risks, where geopolitical tensions drive demand for safe-haven assets, yet investor caution may limit any significant JPY appreciation.
Moreover, ongoing fluctuations in oil prices, currently trading at $65.85—3.8% below the three-month average—remain a point of contention for both currencies. As oil prices have fluctuated in a volatile 25.6% range, the connection between oil movements and impacts on the JPY is noteworthy, especially given Japan's energy reliance.
In conclusion, the exchange rate for INR to JPY is at risk as both currencies grapple with unique challenges. Market participants should closely monitor the developments surrounding U.S. trade policies, central bank actions, and global economic conditions, as they will significantly influence future exchange rate trajectories.
