The FRB and BOJ each raised rates by 0.25%. USD/JPY returned to the ¥156 range, while long-term yields moved into the 3% range. The probability of another rate hike in October is estimated at approximately 53%, and the median forecast for the policy rate at year-end is 4.1%.
The FRB raised its policy rate to 3.75–4.00%, while the BOJ also raised its rate to 1.25%. Despite this combination, the yen's depreciation continued in the market, with USD/JPY briefly reaching the low ¥156 range. Long-term yields moved into the 3% range, and some observers have pointed to fiscal stimulus and changes in financial conditions as having a significant impact on the market.
Market pricing implies a roughly 53% probability of another rate hike in October, while the median forecast for the policy rate at the end of 2026 is 4.1%. The widening interest rate differential between Japan and the United States is affecting the yen, and the outlook suggests that the yen's depreciation trend will continue.
Some analyses suggest that domestic demand will remain under pressure, while external demand could have a comparatively positive effect on the Japanese economy. As AI and changes in financial conditions unfold at the same time, 3 scenarios are being discussed: a scenario in which the yen's depreciation accelerates again, a realistic status quo scenario, and a scenario being monitored for a change in direction.
Regarding domestic and international pressure, attention is focused on how pressure from Secretary Bessent on Japan's fiscal and monetary policy will develop. International developments concerning a shift in reflationary policy and the aggressiveness of fiscal policy could affect markets going forward.