Yen Pressure Mounts as Japan Lags Behind Hawkish Central Banks

The Japanese yen came under pressure on Tuesday as traders bet that Japan's policymakers would struggle to keep pace with hawkish central banks around the world. This sentiment, combined with a Bank of Japan interest rate hike on Friday that included two dovish dissents, sent the yen sliding.

According to Carlos Casanova, senior Asia economist at Union Bancaire Privée, 'Unless the BOJ tightens policy more rapidly than the Federal Reserve, the approximately 275-basis-point US-Japan rate differential should continue to support yen-funded carry trades.'

Casanova predicts that dollar/yen will rise to 160 by year-end before appreciating moderately to 156 by mid-2027.