Yen Hits Six-Month High Vs. Dollar on BOJ Rate-Hike Bets

By Ronnie Harui and Megumi Fujikawa

The yen continued its recent surge against the dollar, bolstered by expectations of faster interest-rate increases by the Bank of Japan and the potential for investment inflows into Japanese assets.

The Japanese currency strengthened to a fresh six-month high against the greenback in Asia on Tuesday, appreciating past levels at the end of July when U.S. and Japan jointly intervened in the foreign-exchange market to curb the yen's weakness.

Still, investors are wary of the possibility of further intervention after Japan's Finance Minister Satsuki Katayama said the country would continue to coordinate with the U.S. to ensure market stability.

"We will maintain close communication with the U.S. Treasury and work to preserve order in the foreign-exchange market," Finance Minister Satsuki Katayama said at a news conference Tuesday.

"Our policy stance has not changed at all since we conducted joint currency intervention with the U.S.," she said, referring to the countries' historic coordinated move to buoy the yen.

Expectations for a quicker pace of Bank of Japan rate hikes have mounted since last Wednesday, when BOJ policy board member Hajime Takata urged a flexible approach to tightening, noting that the central bank's 2% inflation target had nearly been achieved and that the risk of prices overheating was rising.

"Markets [are] now close to fully pricing a 25bp hike at next week's BOJ meeting," said Christopher Wong, FX strategist at OCBC Group Research, in a report.

"Comments from [Prime Minister Sanae] Takaichi's economic adviser Takuji Aida, who expects a Sept. hike followed by further tightening, added to the shift in rate expectations," Wong added.

Aside from expectations of further BOJ rate hikes, remarks from U.S. Treasury Secretary Scott Bessent that investors interpreted as pushing Japan to raise interest rates have also supported the yen.

While Katayama declined to comment on specific exchange-rate levels, her emphasis on maintaining orderly market conditions reflects continued concern over one-sided, speculative yen movements that could disrupt business planning and raise import costs.

The U.S. dollar was recently 0.7% lower at 153.28 yen after earlier touching Y152.87, its lowest intraday level since Feb. 17, according to LSEG data.

"Sentiment towards the yen has shifted materially over the past week, reflecting speculation about a potential change in the Government Pension Investment Fund's asset allocation and rising expectations of faster Bank of Japan rate hikes," said Samara Hammoud, international economist and currency strategist at Commonwealth Bank of Australia.

With about $2.06 trillion in assets, Japan's GPIF is one of the world's largest pension funds, and a small realignment in its investment stance could affect global financial markets. It currently operates under a basic target allocation split equally across four asset classes: domestic bonds, domestic stocks, foreign bonds, and foreign stocks.

Write to Ronnie Harui at ronnie.harui@wsj.com and Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

September 07, 2026 23:16 ET (03:16 GMT)