BOJ Hike Expectations Spark Yen's Sharpest Weekly Gain in Months

The yen has seen its best week in a month, with USD/JPY falling from near 160 to around 156. This sharp decline is largely due to market expectations of back-to-back BOJ hikes, rather than a broader dollar story.

According to Japanese brokerage analysts, the BOJ's September rate hike is now widely priced in at around 97%. What's more significant, however, is the growing probability of a second hike as soon as October, which could mark a genuine departure from the BOJ's traditional six-month cadence between moves.

BOJ Policy Board member Hajime Takata had earlier suggested that 2026 marks 'a change in phase', implying that the central bank may abandon its usual pattern of hiking rates roughly once every six months. This, combined with a Bloomberg report indicating a likely 25bp increase to 1.25%, has led to a rapid repricing of BOJ intentions.

The yen's advance and a flattening of the JGB yield curve are also reflective of markets pricing in a BOJ moving to address its perceived behind-the-curve position. Analysts caution, however, that Takata's remarks should not be taken as representative of the BOJ leadership's collective view.