USD/JPY Rises as BoJ Division and Narrowing Surplus Weigh on Yen
The Japanese Yen has come under pressure as the Bank of Japan's (BoJ) Summary of Opinions from its July 30-31 monetary policy meeting revealed a clear division among board members. While some advocated for holding interest rates steady to evaluate the lagged impact of previous rate hikes, others pushed to maintain or even accelerate the tightening cycle, citing rising upside risks to prices.
The USD/JPY pair has risen as the US Dollar continues to draw support from broad risk aversion due to geopolitical tensions surrounding the Strait of Hormuz. The current account surplus in Japan narrowed to JPY 923.0 billion in June 2026, falling sharply from JPY 1,281.8 billion in the same month last year and missing market forecasts.
TD Securities notes that their projections for next week's CPI would 'likely lead to further pricing out of hikes' and suggests that rates could move lower as hikes are priced out. The Fed's Musalem delivered a modestly more hawkish tone, emphasizing core inflation amid energy volatility and a preference for incremental rate hikes.