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Japanese Yen Strengthens Against USD Amid BoJ Hawkish Expectations
Confirmed
In Short: The Japanese yen has strengthened against the US dollar, supported by expectations of a more hawkish stance from the Bank of Japan (BoJ).
The Bank of Japan (BoJ) is expected to raise interest rates next week, with a 25-basis-point (bps) hike to 1.25% on the table, a move that would lift Japanese borrowing costs to their highest level in more than three decades. This expectation is bolstering the Japanese yen, which has been among the strongest currencies this week.
Expectations surrounding Japanese monetary policy are also supporting the yen, according to Economies. Market pricing for the probability of the Bank of Japan raising interest rates by 25 basis points at its September meeting currently stands at around 99%. Investors are awaiting further data on inflation, unemployment, and wages in Japan to reassess these expectations.
The USD/JPY fell to 153.50 on Wednesday, leaving the Japanese yen close to its strongest level in almost seven months. "The yen is also benefiting from the unwinding of carry trades and growing expectations of capital repatriation to Japan," noted Actionforex. The strength of the yen is expected to continue as the BoJ prepares to raise interest rates, potentially lifting Japanese borrowing costs to their highest level in over three decades.
What's confirmed
- The Bank of Japan (BoJ) is expected to raise interest rates next week, with a 25-basis-point (bps) hike to 1.25% on the table, a move that would lift Japanese borrowing costs to their highest level in more than three decades. This expectation is bolstering the Japanese yen, which has been among the strongest currencies this week.
- Expectations surrounding Japanese monetary policy are also supporting the yen, according to Economies. Market pricing for the probability of the Bank of Japan raising interest rates by 25 basis points at its September meeting currently stands at around 99%. Investors are awaiting further data on inflation, unemployment, and wages in Japan to reassess these expectations.
- The USD/JPY fell to 153.50 on Wednesday, leaving the Japanese yen close to its strongest level in almost seven months. "The yen is also benefiting from the unwinding of carry trades and growing expectations of capital repatriation to Japan," noted Actionforex. The strength of the yen is expected to continue as the BoJ prepares to raise interest rates, potentially lifting Japanese borrowing costs to their highest level in over three decades.
What's still developing
- The USD/JPY pair edges lower during the Asian session on Thursday, snapping a three-day winning streak and eroding a part of the previous day's gains to a nearly two-week high.
- Meanwhile, the US Dollar (USD) touches a fresh high since late July in the wake of the US Federal Reserve's (Fed) hawkish rate hike on Wednesday.
- United States (US) Consumer Price Index (CPI) data held at 3.4% year on year in August, matching both July's reading and market expectations, according to the Bureau of Labor Statistics (BLS).
- The US Dollar (USD) climbed at first, helped by the firmer monthly core figure, but the move lost momentum quickly against the Japanese Yen (JPY), which has been among the strongest currencies this week.
- Bessent said he clearly understood what to expect from the Bank of Japan, particularly regarding when Japanese authorities are prepared to respond to excessive exchange-rate movements.
- Meanwhile, sentiment among Japanese manufacturers improved for a second consecutive month in September, supported by resilient demand from the semiconductor and data-centre sectors.
- Reviewed by Rami Haddad, Editor-in-Chief · Last update: 2026.09.10 The Japanese yen rose against a basket of major and minor currencies in Asian trading on Thursday, extending its gains against the US dollar for a fourth consecutive day and moving toward a retest of its seven-month high, supported by continued weakness in the US currency ahead of key inflation data in the United States.
- It reached a seven-month high of ¥152.89 the previous day amid strong bullish catalysts.