BOJ Rate Hike Boosts Yen as Japan's Economy Surpasses Expectations

The Japanese economy has exceeded initial expectations, according to revised data released on September 8. The country's gross domestic product (GDP) expanded by 0.4% in the second quarter, surpassing the preliminary reading of 0.3%. This revision is significant, as it suggests that private consumption and corporate investment remained weak, but not as weak as initially thought.

Analysts had expressed concerns that the initial GDP reading could complicate the Bank of Japan's (BOJ) efforts to raise interest rates in response to surging inflation and a weakening yen. The BOJ is expected to hike its key interest rate next week, which would be its first increase since 2007.

Despite some concerns about Prime Minister Sanae Takaichi's spending plans, the Japanese currency has been bolstered by rate hike speculation in September. This move has helped boost the yen to its highest level in 2026 so far.