BoJ Hike Expectations Send Japanese Yen Strengthening Against USD

The Japanese Yen has strengthened modestly as markets anticipate a faster pace of Bank of Japan policy tightening, according to MUFG's Lee Hardman.

A Bloomberg report suggests Prime Minister Takaichi's government supports a near-term BoJ hike, likely in September or October, which is aligning with the bank's fears over yen weakness driving up prices and the government's desire to strengthen the impact of the recent US-Japan currency intervention.

Kyodo news reported that joint FX intervention was enabled by Governor Ueda's hawkish stance at the 31st July policy meeting, where he stated explicitly that if necessary, the BoJ would 'accelerate the pace of rate hikes'.

The report concludes that the BoJ has effectively left itself with no option other than a rate hike at its next Monetary Policy Meeting on 17th-18th September.