The Japanese yen edged lower on Monday, retreating slightly after recording its strongest weekly performance in over a year, while the U.S. dollar held steady amid growing expectations that the Federal Reserve could lower interest rates later this year.

Trading activity was subdued, with financial markets in the United States, China, Taiwan, and South Korea closed for public holidays.

The yen weakened by 0.3% to 153.15 against the dollar, giving back some of the nearly 3% gains it posted last week its biggest weekly rise in roughly 15 months. The surge followed a decisive election victory by Prime Minister Sanae Takaichi’s Liberal Democratic Party, which appeared to ease investor concerns over fiscal uncertainty.

Later on Monday, Bank of Japan Governor Kazuo Ueda is scheduled to meet Takaichi for the first time since the election. The talks are expected to focus on the country’s economic outlook and the direction of monetary policy.

Market analysts noted that the election outcome triggered an unexpected rally in both Japanese government bonds and the currency. Brent Donnelly, founder of Spectra Markets, said investors had anticipated that a commanding majority for the ruling party would weigh on bonds and the yen. Instead, both strengthened.

According to Donnelly, reduced political uncertainty encouraged long-term investors to return to Japanese assets. He described the renewed interest in Japanese yields, equities such as the Nikkei, and the currency itself as part of a broader “Buy Japan” trend.

However, fresh economic figures highlighted ongoing challenges for the government. Data released Monday showed Japan’s economy grew at an annualised pace of just 0.2% in the previous quarter, underscoring sluggish momentum.

The weak growth numbers could complicate the Bank of Japan’s path toward further monetary tightening. The central bank’s next policy meeting is set for March, with market pricing suggesting only a 20% probability of a rate increase. Economists surveyed by Reuters previously indicated that policymakers may hold off until July before raising rates again.

In December, the Bank of Japan raised its benchmark rate to 0.75%, the highest level in three decades, though it remains far below rates in other major economies. The wide interest-rate gap has contributed to persistent yen weakness in recent years, at times prompting authorities to step in directly to stabilise the currency.

Strategists at Goldman Sachs cautioned that if the BOJ uses the yen’s recent strength as justification for a more gradual tightening approach, the currency could resume its downward trend, and long-term bond yields may become volatile. Goldman forecasts the yen will trade around 152 per dollar over the next 12 months.

Meanwhile, in the United States, softer-than-expected inflation data released Friday reinforced the case for policy easing. Consumer prices rose less than anticipated in January, giving the Federal Reserve additional room to consider rate cuts.

Kyle Rodda, senior financial analyst at Capital..com, said markets are increasingly entertaining the possibility of a third rate cut this year.

Billionaire investor Femi Otedola has expressed optimism that the naira could strengthen to below ₦1,000 against the U.S. dollar before the end of the year, citing the full-scale operations of the Dangote Group refinery as a major catalyst.

In a post on X, Otedola congratulated Africa’s richest man, Aliko Dangote, on achieving the refinery’s full production capacity of 650,000 barrels per day, describing the milestone as a game-changer for Nigeria’s economy.

He noted that the refinery’s ability to supply up to 75 million litres of Premium Motor Spirit (PMS) daily marks a historic shift from decades of dependence on imported petroleum products.

“With domestic refining now fully underway, the pressure on Nigeria’s foreign exchange market is expected to ease considerably,” Otedola stated. He added that reduced demand for dollars to fund fuel imports could significantly strengthen the naira, making sub-₦1,000/$1 exchange rates increasingly realistic before year-end.

For years, Nigeria relied heavily on imported refined petroleum products, a situation that drained foreign reserves and intensified demand for foreign currency. According to Otedola, large-scale domestic refining will reverse that trend, improve energy security, and stabilise the currency market.

He further revealed that Dangote has initiated a $12 billion expansion project to increase refining capacity to 1.4 million barrels per day. The expansion will also scale up petrochemical production, including 2.4 million tonnes of polypropylene and 400,000 metric tonnes of Linear Alkyl Benzene, a vital input in detergent manufacturing.

Describing the development as more than an industrial milestone, Otedola said it represents a broader economic reset capable of strengthening the naira, stimulating manufacturing, and reducing Nigeria’s exposure to global supply, shocks.

The projection comes at a time when the federal government is implementing sweeping economic reforms aimed at stabilising the currency and boosting domestic production.

President Bola Ahmed Tinubu has commended the Bank of Industry (BOI) for disbursing a record N636 billion to more than 7,000 businesses in 2025; the highest annual financing in the bank’s history.

According to a State House statement, N202 billion went to agro-allied enterprises, N100 billion to critical infrastructure such as broadband, power and transportation, N79 billion to manufacturing, N77 billion to extractive industries, and N55 billion to services. An additional N73 billion was deployed as managed and matching funds.

Breakdown by business size shows large enterprises received N375 billion, SMEs N178 billion, nano businesses N51 billion, and micro enterprises N32 billion.

Under the Federal Government’s N200 billion MSME intervention programme, BOI reportedly achieved over 95 percent performance as a disbursing institution, while the Presidential Conditional Grant Scheme reached 957,400 beneficiaries in 2025.

The bank’s financing activities contributed to the creation and retention of about 1.6 million jobs and supported over 7,000 MSMEs and 570 startups.

Inclusive programmes saw women-owned enterprises access funding under a N10 billion facility, while youth-owned businesses received N12 billion. In rural areas, 880 enterprises accessed N6.5 billion across the 36 states and the FCT.

BOI maintained a non-performing loan ratio below 1.5 percent and strengthened its lending capacity with a €2 billion syndicated facility secured in 2024 and €210 million mobilised in 2025.

President Tinubu described the milestone as evidence that ongoing economic reforms are expanding access to long-term capital and supporting industrial growth.