Japanese Yen Weakens Post-BoJ Rate Hike Amid Hawkish Fed and Intervention Warnings
| Pair | Now | Since publish |
|---|---|---|
| USDJPY | — | — |
| AUDJPY | — | — |
| GBPJPY | — | — |
| EURJPY | — | — |
| CADJPY | — | — |
- JPY weakens post-BoJ hike; USD/JPY hits 157.75.
- BoJ hike seen dovish; Fed hawkishness supports USD.
- BoJ minutes confirm accommodative financial conditions focus.
The Japanese Yen (JPY) extended its depreciation against the US Dollar (USD) this week, with the USD/JPY pair climbing to a three-week high near 159.00, despite the Bank of Japan (BoJ) raising its policy rate by 25 basis points (bps) to 1.25% on September 18. Markets interpreted the BoJ’s decision, which included a 7-2 split vote and limited forward guidance, as relatively dovish, undercutting hawkish expectations. Concurrently, a hawkish US Federal Reserve (Fed) outlook, reinforced by strong US business activity data showing September’s S&P Global US Composite PMI accelerating to a five-year high, bolstered the US Dollar Index (DXY) to a seven-week high above 101.00. This divergence in monetary policy stances widened US-Japan yield differentials, further pressuring the Yen, even as Japan’s 10-year government bond (JGB) yield briefly hit a 30-year high of 3.055%. The Yen’s weakness, particularly as USD/JPY approached the 160.00 level, intensified speculation about potential foreign exchange intervention, with reports of BoJ “rate checks” and warnings from Finance Minister Satsuki Katayama that intervention remains an option to address excessive currency moves, while US President Donald Trump also expressed concerns over the weak Yen.
The Bank of Japan (BoJ) released the minutes from its July meeting on Monday, revealing that members agreed financial conditions remain accommodative. This comes as several members noted rising consumer prices due to import costs and increasing medium- to long-term inflation expectations. Following the release, the Japanese Yen weakened further against a bullish US Dollar, with the USD/JPY pair climbing to 157.75 in the Asian session. The US Federal Reserve’s hawkish outlook continues to underpin the US Dollar and keep US bond yields elevated.