USD/JPY is expected to probe lower levels against a backdrop of expectations for a BOJ rate hike and a change to GPIF's portfolio, while many market participants expect activity to remain limited ahead of tonight's US jobs report.
Ahead of the BOJ's next monetary policy meeting, USD/JPY is expected to probe lower levels, with trading likely to remain subdued ahead of tonight's release of the US August jobs report. Expectations regarding the timing and pace of BOJ rate hikes, as well as a change to GPIF's basic portfolio, are cited as factors that could influence the yen.
A 0.25% rate hike at the BOJ meeting is generally considered to be priced in, while the focus is expected to be on whether the size of the hike will be increased to 0.50% and whether the BOJ will move to a series of flexible, consecutive rate hikes. Some market participants are reportedly expecting 3 rate hikes by next spring.
In the United States, differing interpretations of remarks made at Jackson Hole, including comments by Fed Governor Warsh that he supports leaving rates unchanged as inflation slows and by New York Fed President Williams that interest rates are at an appropriate level, are seen as bringing the probabilities of a rate hike and a hold at the September FOMC meeting into close balance.
Against the backdrop of past intervention, USD/JPY is expected to fall again from the 160-yen level to the 155-yen level following comments from the Treasury secretary, and concerns remain that Treasury Secretary Bessent's views could affect the market.