BOJ Must Out-Hawk Market Expectations to Boost Yen

The USD/JPY exchange rate has continued to rise despite softer US data and faster BOJ hike talk. The yen has received several tailwinds in recent weeks, but the market seems to be looking beyond near-term factors and BOJ pricing.

US economic data surprises have retraced to levels not seen since early May, which may question the narrative of USD/JPY continuing to push to multi-decade highs due to US economic exceptionalism. However, Japanese data surprises remain largely positive.

The BOJ's interest rate hike prospects are also being reassessed, with some speculating that it could move rates earlier than expected. But simply bringing forward the next move may not be enough to fundamentally alter the upward trend in USD/JPY.