Yen Rises on BOJ Rate Hike Bets

The Japanese yen fell to around 153.5 per dollar on Wednesday, giving back gains from the previous session despite strong trade data. Exports surged in January at the fastest pace in over three years, supported by robust demand for AI-related chips. The data reinforced expectations that the Bank of Japan may continue its path toward policy normalization. Still, the recent weak Q4 GDP, which fell short of market forecasts and narrowly missed a technical recession, has tempered optimism. Traders expect that Prime Minister Sanae Takaichi’s policies could support economic growth, indirectly reinforcing the BoJ’s gradual normalization strategy. Markets are pricing in a potential interest rate hike by the BoJ in April. Meanwhile, the IMF reiterated that it does not target the yen’s level, noting that the currency’s value is determined by market forces.

The Japanese yen strengthened toward 153 per dollar on Tuesday, recovering losses from the previous session amid growing speculation of an earlier interest rate hike by the Bank of Japan. Former BOJ board member Saiji Adachi said on Monday that the central bank is likely to raise its benchmark rate in April, having accumulated sufficient data by then to justify a move. BOJ Governor Kazuo Ueda also said that Prime Minister Sanae Takaichi made no specific requests during their regular meeting on Monday, where they discussed the economy. Despite concerns that Takaichi could obstruct the BOJ’s policy normalization plans, she has so far refrained from opposing a rate increase amid market pressure. Meanwhile, the yen declined on Monday after Japan’s fourth-quarter economic growth came in well below expectations due to weak domestic demand.

The Japanese yen weakened past 153 per dollar on Monday, trimming last week’s gains after Japan’s fourth-quarter 2025 growth came in well below expectations. The economy expanded 0.1% QoQ in Q4, rebounding from a 0.7% contraction in Q3 but missing forecasts for a 0.4% increase. Consumer spending, the largest component of GDP, rose just 0.1%, highlighting subdued domestic demand as households continued to grapple with elevated inflation. Prime Minister Sanae Takaichi recently reaffirmed her commitment to supporting growth through proactive fiscal measures following her landslide victory in the Feb. 8 Lower House election. Meanwhile, the yen had rallied nearly 3% last week, marking its strongest weekly performance since November 2024, on expectations that Takaichi’s fiscal expansion plans could lift growth without placing undue strain on public finances. Bets on further rate hikes by the Bank of Japan and concerns over possible currency intervention also lent support to the currency.