Japanese Yen: Policy doubts weigh on Yen – BNY

BNY’s Geoff Yu highlights that weak Japanese Gross Domestic Product (GDP) data and rising JGB yields are undermining confidence in the Bank of Japan’s ability to sustain a stronger Yen. USD/JPY is trading above 159.00 after giving back intervention gains, while iFlow data show persistent JPY outflows, though selling has recently eased as positioning turns underheld again.

Yen slides as yields test credibility

"Japan’s Q2 preliminary GDP data has again cast doubt on the Bank of Japan’s (BoJ) ability to hike rates, even though markets see such a move as necessary for the Japanese authorities to have any chance of success in the JPY’s defense."

"The overnight weakness in the JGB market also hints at significant concerns over policy credibility."

"Based on our flow figures, the market remains skeptical of success and has used the opportunity to sell JPY, both on an aggregate basis and against the USD."

"Based on flows since July 30 – the first day of the intervention – JPY’s daily average sales magnitude is 0.86, which is above the 0.79 daily average for USD/JPY on a standalone basis."

"However, the past week has seen selling gradually ease, especially as our data highlight the JPY is now underheld again for the first time since end-2024, albeit current holdings levels are extremely noisy."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)