USD/JPY fell from around ¥160 to the low ¥155s at one point last week. This week, attention will remain focused on developments at the Federal Reserve and the Bank of Japan, as well as oil-price trends, while the interest-rate outlook for major economies will be a key market concern.
USD/JPY came under increasing upward pressure last week, with the yen strengthening to levels around ¥160. Factors cited as contributing to the move included Finance Minister Bessent’s comments on the possibility of measures that would lead to “a stronger yen,” Bank of Japan Policy Board member Takata’s suggestion of aggressive rate hikes, and speculation that the GPIF may review its asset allocation. The market also reacted sensitively to movements in long-term interest rates.
With Labor Day, a market holiday in the United States and Canada, approaching this week, the focus will be on election campaigns from November onward and oil-price trends. WTI has been trading around $92 amid tit-for-tat attacks involving crude oil, and its trading range could widen again depending on interest-rate developments.
The market is pricing in a 0.25% rate hike at the September FOMC with a probability just under 60%, although expectations could change depending on the August CPI results. Movements in U.S. long-term interest rates are directly linked to USD/JPY, and changes in the U.S.-Japan interest-rate differential could become a factor in a trend reversal.
In Japan, a 0.25% rate hike at the monetary policy meeting on the 17th and 18th is viewed as almost certain, including in light of remarks from BOJ board member Masu (増). Speculation over what Finance Minister Bessent meant by information “the market does not have” could also affect long-term interest rates and foreign-exchange markets.