Yen Weakens as BOJ Summary Disappoints

The Japanese yen weakened past 158 per dollar on Thursday, moving toward one-month lows as the summary of opinions from the Bank of Japan’s September meeting fell short of investors’ expectations for stronger hawkish signals from policymakers. The summary showed the central bank shifting its focus toward preventing inflation from exceeding its target, pointing to another rate increase this year, but provided little clarity on the timing ahead of policy meetings in October and December. The yen also faced pressure from a stronger dollar and elevated Treasury yields amid expectations that the Federal Reserve may need to raise interest rates further to contain energy-driven inflation. This supports the prospect of wider US-Japan interest-rate differentials, as the Fed’s tightening cycle continued to outpace the BOJ’s rate hikes.

The Japanese yen weakened past 158 per dollar on Thursday, reversing recent gains as the dollar and Treasury yields continued to rise amid expectations that the Federal Reserve may need to raise interest rates further to contain energy-driven inflation. The Japanese currency also remained under pressure from wide US-Japan interest-rate differentials, as expectations for further Fed tightening continued to outweigh the Bank of Japan’s rate hikes. However, softer-than-expected US PCE inflation data prompted traders to reduce bets on a Fed rate hike in October. In Japan, a summary of opinions from the BOJ’s September meeting showed that policymakers saw a need to accelerate the pace of rate hikes or bring them closer to the central bank’s target in the near term. Meanwhile, traders remain alert to the possibility of currency intervention as Japanese authorities have stepped up verbal warnings in recent sessions.

The Japanese yen strengthened past 157 per dollar on Wednesday and was on track to finish the month higher, as traders responded to a series of verbal warnings from officials signaling Tokyo’s determination to support the currency. Finance Minister Satsuki Katayama said Japan and the US would maintain close communication as they seek to preserve stability in currency markets amid rising concerns over the yen’s weakness. She also said President Donald Trump expressed concern about the yen during a meeting with Prime Minister Sanae Takaichi. Japan’s top currency official Atsushi Mimura also said this week that the prime minister and finance minister, along with the US, had delivered a “very clear” message regarding excessive currency depreciation. Still, the yen remained under pressure from wide US-Japan interest-rate differentials, as the Federal Reserve’s tightening outlook continued to outweigh the Bank of Japan’s rate hikes.