Investors bet on accelerated Bank of Japan tightening as JPY weakness fuels inflation concerns, lifting the currency from multi-decade lows.
The Japanese Yen (JPY) rallied sharply in European trading, with USD/JPY plunging to near 162.65 before paring losses to 162.90. The move follows reports that BoJ officials may raise rates faster than economists expect, citing JPY depreciation as an inflation risk.
USD/JPY hit a 38-year high of 163.23 on Tuesday, driven by widening rate differentials with other central banks. Markets now await next week’s BoJ policy decision, where rates are expected to remain at 1%. Speculation of intervention also supported the yen after Finance Minister Satsuki Katayama warned of potential forex action.
The yen’s rebound reflects growing bets on a more aggressive BoJ tightening cycle, though officials have not signaled an imminent move.