Japanese Yen nudges lower despite a hawkish BoJ, intervention warnings

The Japanese Yen (JPY) is trimming gains from Friday’s rebound against the US Dollar (USD) on Monday. The hawkish minutes by the Bank of Japan (BoJ) and growing signals that the US and Japan might launch a new joint intervention have failed to spook Yen bears, who are pushing the USD/JPY pair to levels towards the 158.00 level.

The minutes of the BoJ’s monetary policy meeting, released earlier on Monday, revealed that some policymakers advocated for faster interest rate increases in September, amid growing concerns about the mounting inflationary pressures. This has fed hopes that the bank will keep tightening its monetary policy over the coming months.

The BoJ raised its benchmark interest rate by 25 basis points to a 31-year high of 1.25%, but two policymakers voted to leave it on hold, which cast doubt about the scope of the hawkish cycle and disappointed investors. The Yen has depreciated more than 1.5% against the USD ever since.

US authorities show concern about Yen weakness

The Yen pared some losses on Friday as Japanese Finance Minister Satsuki Katayama affirmed that US President Donald Trump had expressed his concern about Yen weakness in a summit with Prime Minister Sanae Takaichi on the sidelines of the United Nations General Assembly last week.

Takaichi confirmed those coments later in the day, while Katayama added that she held a phone call with the US Secretary of State, Scott Bessent, in which they reaffirmed their commitment against excess volatility and disorderly moves on the Yen. This is a rather explicit warning of another joint intervention like the one that sent the Yen surging on July 31.

The fundamental background, however, remains USD-supportive. A rift of strong US data and hot inflationary pressures has boosted US Treasury yields to multi-decade highs, prompting investors to practically fully price in at least another interest rate hike by the Federal Reserve (Fed) before year-end.

Investors will be attentive to a slew of US macroeconomic indicators to confirm these views later this week, with the US Personal Consumption Expenditures (PCE) Price Index on Wednesday and September’s Nonfarm Payrolls (NFP) report on Friday likely to raise particular interest.