Japanese Yen dips back to 160.00 against the US Dollar as post-BoJ gains fade
- USD/JPY returns above 160.00 after bouncing up from session lows at 158.54.
- BoJ's Governor Ueda reiterated the bank's commitment to monetary tightening after Friday's meeting.
- Analysts at BBH affirm that there is room for a hawkish repricing of the BoJ's monetary policy that would have a positive impact on the Yen.
The Japanese Yen (JPY) posts moderate losses against the US Dollar (USD) on Friday, with the USD/JPY trading just above 160.00 at the time of writing, after whipsawing within a rough 240-pip range between 158.60 and 161.00 earlier on the day. The Yen rallied after Bank of Japan (BoJ) Governor Kazuho Ueda hinted at further rate hikes, but failed to hold gains during the European trading session.
The BoJ left its benchmark interest rate unchanged at 1%, but Governor Ueda assured that the bank is moving “in the same cycle as US and European central banks” at the press conference. Ueda also warned that indicators for medium- to long-term inflation expectations are “rising significantly,” which suggests that the central bank will resume monetary tightening in the coming months.
Before that, the Japanese Yen had rallied about 400 pips on Thursday with no clear fundamental driver to explain such move, which raised speculation of an intervention by Tokyo authorities.
These rumours were confirmed on Friday as Japan’s Top currency diplomat, Atsushi Mimura, suggested that US authorities collaborated in the action, affirming that “we are receiving support by the United States that goes n¡beyond psychological support and I am constantly in contact with relevant authorities."
BBH: BoJ hawkish hold lifts JPY rate expectations
Analysts at Brown Brothers Harriman note that the BoJ delivered what they describe as a “hawkish hold,” keeping the policy rate at 1.00% “as was widely expected” but reiterating that it “will continue to raise the policy interest rate.”
The experts point out that the BoJ has delivered “just 50bps of tightening since December 2025,” but emphasize that the updated outlook report now “points to a faster normalization path toward the middle of its estimated 1.10%-2.50% neutral range.” According to BBH, the “bottom line” is that “there is room for a hawkish BoJ repricing in favor of JPY,” with the swaps curve having already “raised the implied odds of a September BoJ hike to roughly 40% from 20%.”
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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