Investors trim Fed rate hike expectations while Tokyo inflation data fuels speculation of further Bank of Japan tightening.
USD/JPY fell to around 161.60 on Friday, retreating from the 162.00 level as profit-taking and intervention fears weighed on the pair. The yen gained support from rising expectations of additional Bank of Japan rate hikes after June meeting minutes revealed policymakers’ inflation concerns.
Markets scaled back bets on two more Federal Reserve rate hikes this year, with the CME FedWatch tool showing reduced odds amid easing energy prices. Tokyo inflation data this week reinforced expectations for further BoJ tightening, with one board member advocating for a policy rate near the estimated 2% neutral level.
Japanese officials reiterated readiness to intervene in currency markets if moves become excessive, with Finance Minister Katayama discussing developments with US Treasury Secretary Bessent. Analysts now view the 162.00-163.00 range as a potential intervention zone.