BoJ Pressure and Yen Outlook: Will USD/JPY Reach 157-158?

Rabobank's Jane Foley examines the Japanese Yen (JPY) weakness due to Prime Minister Sanae Takaichi's preference for low interest rates. This has led to speculation that the government is leaning on the Bank of Japan (BoJ) not to raise rates, undermining the JPY.

The US Treasury joined Japan's Ministry of Finance in a round of concerted intervention in support of the JPY in late July. However, JGB yields have been rising due to supply and inflation concerns, which could lead to further BoJ tightening.

Foley argues that inflation risks support further BoJ tightening, while another rate hike and renewed intervention could lift the Yen. She predicts that USD/JPY could trade in the 157-158 area over the next 3-6 months.