The USD/JPY pair fell to 154.35 as the Japanese yen (JPY) rose amid growing expectations of a rate hike from the Bank of Japan (BoJ) this month. Markets expect the Bank of Japan to raise interest rates by 25 basis points on December 14, with the possibility of two more rate hikes next year to 1.25% by the end of 2026, said Lee Hardman and Abdul Ahad Lockhart, currency analysts at MUFG.
Expectations of an interest rate hike from the Bank of Japan lifted the yen
“The yen continued to strengthen during the Asian trading session, sending USD/JPY falling to a new low of 154.35. It leaves the yen on track for a second straight week of gains against the US dollar. The yen benefited this week from growing expectations that the Bank of Japan will resume raising interest rates this month.”
“The Bloomberg report provides confirmation that recent comments from Bank of Japan officials, including Governor Ueda, were intended to signal to market participants that interest rates will be raised this month, and that the government will not stand in their way. However, the report noted that the final decision on a rate hike will be made at the last minute after evaluating all economic data and information.”
“The latest Tankan survey is due to be released before the BOJ’s next policy meeting on December 14, and unless there is a major downside surprise to business confidence, we expect the BOJ to raise interest rates by 25 basis points this month. We then expect the BOJ to stick to a gradual pace of tightening, and expect to raise interest rates twice (every six months) next year taking the interest rate to 1.25% by the end of 2026.”
