BOJ Faces Pressure as Yen Hits New Low After Fed Rate Hike

The Bank of Japan is under pressure after the US Federal Reserve raised interest rates for the first time since 2023. The sharp weakening of the yen, which lost up to 1% of its value overnight and reached 156.42 per dollar, has increased expectations that the Bank of Japan will raise its rate this week.

Market participants are pricing in three more rate hikes by the middle of next year, which could preserve a significant gap between US and Japanese interest rates. The Bank of Japan is expected to raise its rate by 25 basis points, but investors will be watching for signals on further policy tightening from Governor Kazuo Ueda.

According to Glenn Yin, research director at ACCM in Melbourne, Japan is under significant pressure not only to raise rates but also to send a hawkish signal to markets. A rapid move toward 160 yen per dollar cannot be ruled out if the Bank of Japan disappoints investors.