The Japanese yen weakened beyond 156 per dollar on Friday, trading near a two-week low as investors awaited the latest Bank of Japan policy decision, with markets broadly anticipating an interest-rate hike. Market participants are also looking for guidance on the likelihood and pace of further tightening as policymakers confront rising inflation and wage growth, alongside pressure from US Treasury Secretary Scott Bessent for a more aggressive cycle of rate increases.
In parallel, Japan’s core inflation slowed to 1.7% in August from 1.8% in July, its first deceleration in four months. Still, expectations that price pressures could intensify in the coming months continue to underpin a hawkish outlook for the BOJ, with disruptions linked to the Middle East further heightening inflation risks.
Earlier this month, the yen had risen to a seven-month high, driven by bets on more forceful BOJ tightening, recent joint intervention by Tokyo and Washington, and the prospect of increased capital repatriation by Japanese investors.
