Yen Strengthens on Hawkish BOJ Minutes

The Japanese yen strengthened past 158 per dollar on Thursday, extending gains for a second consecutive session as minutes from the Bank of Japan's September meeting reinforced expectations of further monetary tightening. One board member indicated that there may be room to accelerate interest rate increases as the central bank assessed the effects of Middle East developments, growing demand linked to artificial intelligence, and foreign exchange movements. The BOJ raised its policy rate to a 31-year high of 1.25% in September before keeping it unchanged in October, while signaling that underlying inflation had reached its 2% target, potentially setting the stage for another rate hike in December. The yen also drew support from a weaker US dollar following Democratic victories in the US midterm elections. The decisive outcome eased political uncertainty and lowered expectations that President Donald Trump would resume military strikes against Iran.

The Japanese yen strengthened toward 157.5 per dollar on Wednesday, reversing a two-day decline as the US dollar came under significant pressure after early election polls suggested a possible Democratic takeover of both chambers of Congress. The prospect has heightened political uncertainty in the US, with a potential Democratic sweep raising concerns over stricter AI regulations and increased corporate oversight that could weigh on the country's economic growth outlook. The yen also gained support from safe-haven demand, alongside government bonds, as technology and artificial intelligence stocks faced renewed selling pressure. Meanwhile, investors are looking ahead to Japan’s wage data due later this week for further clues on the Bank of Japan’s monetary policy outlook. Last week, the BOJ kept its benchmark interest rate unchanged at 1.25% but indicated that underlying inflation had reached its 2% target, potentially paving the way for another rate hike as early as December.

The Japanese yen weakened toward 158 per dollar, struggling to gain traction despite renewed verbal warnings from Tokyo. On Monday, Finance Minister Satsuki Katayama reiterated that authorities are prepared to take action if currency movements become excessive or disorderly, while emphasizing continued coordination with the US on foreign exchange matters. Meanwhile, investors are awaiting Japan’s wage data due this week for further indications of the Bank of Japan’s monetary policy direction. Last week, the BOJ kept its benchmark interest rate unchanged at 1.25% but signaled that underlying inflation had finally reached its 2% target, potentially opening the door to a rate hike in December. Elsewhere, safe-haven demand for the yen weakened as the technology stock selloff, driven by growing concerns over artificial intelligence valuations, began to ease. However, disappointing corporate earnings continued to weigh on Japanese equities.