Yen Rallies as Market Sentiment Falters- Fiscal Outlook Poses Risk -David Song, Currency Analyst at DailyFX

The Japanese Yen rallied across the board as market sentiment faltered on Tuesday, but the low-yielding currency may struggle to hold its ground during the final days of August amid the ongoing discussion surrounding the sales-tax hike. It seems as though Japanese officials are struggling to meet on common ground amid the mixed opinions on how the new government should implement the first sales-tax hike in 15-years, and the shift in fiscal policy may dampen the appeal of the Yen as it puts additional pressure on the Bank of Japan to shore up the real economy. Indeed, BoJ Governor Haruhiko Kuroda may come under increased pressure to implement more non-standard measures over the near to medium-term, and the central bank may further embark on the easing cycle in 2014 in an effort to combat deflation."