The Japanese Yen (JPY) has seen a resurgence after hitting a record low post-BOJ rate hike in July, with DBS FX strategist Chang Wei Liang pointing out a reduction in JGB purchases from JPY6trn to JPY3trn in Q1 2026.
USD/JPY Surges Towards 150 Mark
According to Liang, the BOJ’s move to normalize interest rates has caught markets off guard, causing a sharp decline in yen carry trades and pushing USD/JPY down to 142.
Looking ahead, the BOJ’s policy decisions will be closely monitored, with uncertainty surrounding the rate trajectory potentially limiting market enthusiasm for JPY-based carry trades. Additionally, Japanese officials are showing a stronger preference for a stronger JPY.
Japan has intervened to bolster the JPY in recent months, and the risk of further intervention looms if USD/JPY approaches the 150 level once again.
Analysis:
The BOJ’s actions to normalize interest rates have had a significant impact on the Japanese Yen, leading to a rebound in its value. This could potentially affect USD/JPY exchange rates, with the pair eyeing a break above 150. Investors and traders should closely monitor the BOJ’s policy decisions and be prepared for potential interventions to support the JPY. This development could have implications for global financial markets and individual investment portfolios, highlighting the importance of staying informed and adaptable in the ever-changing world of finance.