Markets price an 85% chance of a Bank of Japan rate increase in September, lifting the yen against the dollar and other G10 currencies.
The Japanese yen strengthened against most G10 currencies as traders raised bets on a Bank of Japan rate hike in September to 85%. This marks the highest implied probability since the BoJ’s June meeting, driven by strong services PPI data and hawkish remarks from former officials.
Expectations of tightening have been reinforced by former BoJ policy board member Seiji Adachi, who suggested a September hike is likely, with another possible in January. Upcoming BoJ speeches and a cautious Federal Reserve stance at Jackson Hole could further weigh on USD/JPY.
If the Fed signals no imminent September hike, U.S. front-end rates may soften, amplifying yen gains. The BoJ’s inflation outlook deliberations remain key to policy decisions.