BOJ Minutes Confirm Market Focus on September Rate Hike

The Bank of Japan's (BOJ) July minutes are largely seen as a formality now, given that markets have already moved past the July decision and are focused on the September outcome. The yen's unexpected weakness following an actual hike is the bigger story for FX and rates, with USD/JPY pushing past 157 as the 7-2 vote split and Governor Ueda's refusal to offer firm forward guidance undercut expectations for a faster hiking cycle.

The yen carry trade remains intact for now, since the US-Japan rate gap remains wide even after Japan's tightening. Japanese Government Bond yields have actually fallen in recent weeks, despite the rate hike, which is unusual and has contributed to the yen's weakness.