BOJ Shift Sends Yen Soaring Amid Rate Hike Expectations
The Japanese yen is rallying on Thursday, with the USD/JPY pair dropping 0.7% to 157.6 yen amid a sharp shift in expectations about Bank of Japan policy.
Markets had been betting on an imminent rate hike, particularly after BOJ Governor Kazuo Ueda hinted that the central bank would discuss higher rates and inflation when it meets in mid-September.
The hawkish tone from the BOJ was reinforced by diplomatic pressure from Washington. U.S. Treasury Secretary Scott Bessent met with Finance Minister Satsuki Katayama, where they agreed to coordinate efforts for 'orderly' yen moves, while Governor Ueda signaled that policymakers need to pay greater attention to upside price risks when conducting monetary policy.
BOJ board member Hajime Takata, one of the bank's most hawkish members, left the door open for an outsized interest-rate increase as well as back-to-back hikes.