As the yen continues to weaken, pressure on the Bank of Japan is mounting, and the market is increasingly pricing in a rate hike from September onward. Moves toward coordinated intervention with the United States and the widening interest rate differential are influencing the yen's direction and the policy outlook.
After falling sharply, the yen temporarily recovered following coordinated intervention with the United States, but then weakened again to the ¥159 range, falling to around ¥163.99 per US dollar. The move was described as the yen's lowest level in 40 years, raising concerns about its impact on living costs and import prices.
Japan coordinated with the United States to buy yen and stabilize the exchange rate. The yen subsequently strengthened again, but the recovery did not last, and the currency has since returned to weaker levels. Statements by the US Treasury Secretary and the intervention stance of the governments and finance authorities also drew attention.
The market's focus is shifting from intervention to the Bank of Japan's interest rate policy. The widening interest rate differential between Japan and the United States is believed to be reducing the appeal of yen-denominated assets and contributing to downward pressure on the yen. The probability of a September rate hike has risen in the market and is currently estimated at around 75%.
Bank of Japan Governor Ueda (上田) has referred to the possibility of accelerating the pace of rate hikes in response to upward price pressures. While the government has emphasized that the Bank of Japan has authority over such decisions, Prime Minister Takaichi has been cautious about accelerating the pace of rate hikes in light of their impact on the economy, making the government's stance a focus of market attention.