The Japanese Yen (JPY) has maintained a firm stance against major currencies, notably the US Dollar (USD), as markets anticipate a hawkish move from the Bank of Japan (BoJ) at its upcoming policy meeting scheduled for September 17-18. The USD/JPY pair is trading near 153.45, close to its six-month low of 152.89 posted on Wednesday, reflecting persistent downside pressure and a bearish tone in the near term, with the Relative Strength Index (RSI) at 25.76 indicating oversold conditions [1]. The AUD/JPY cross has softened to around 110.75, and EUR/JPY remains steady near 178.60 after three days of losses, both exhibiting bearish technical signals and oversold momentum [3][4].
Market experts, including analysts at DBS and Commerzbank, believe a 25 basis point rate hike by the BoJ is almost certain, with guidance expected to signal a flexible pace of future hikes. Commerzbank notes that an interest rate hike next week is priced in at roughly 96%, and the market expects further hikes to follow quickly thereafter. This hawkish expectation has contributed to the Yen's appreciation across the board [1]. According to a Reuters poll, the BoJ is likely to hike rates to 1.25% at its September meeting and then to 1.75% in Q2 2027, earlier than previously anticipated [3].
BoJ policy board member Kazuyuki Masu stated that underlying inflation is gradually approaching 2%, but does not foresee it overshooting sharply above that level. Masu emphasized the need to fix the policy rate, which has been below the estimated neutral range for a very long time, and suggested a cautious approach to raising borrowing costs. He also noted that the Yen is rising while crude oil and global food prices are increasing, and these factors will be scrutinized comprehensively at next week's meeting. Masu clarified that the rate decision for next week is not yet determined, and future meetings will be assessed individually [2]. Last week, BoJ board member Hajime Takata indicated that a 25-basis-point hike is not necessarily set in stone, and back-to-back rate hikes could be a possibility [3].
Technical analysis across currency pairs shows bearish momentum for JPY crosses, with USD/JPY and AUD/JPY both trading below key moving averages and in oversold territory. EUR/JPY is also in a descending channel pattern, with primary support at 177.90 and resistance at 180.84 and 183.72 [1][3][4]. The Euro has weakened slightly against the Yen (-0.02%) and other major currencies, according to the latest heat map [4].
DBS Group Research cautions that the BoJ must tread carefully to avoid excessive market volatility, referencing the massive JPY carry-trade unwinding triggered by the unexpected rate hike in July 2024. The risk of further carry-trade unwinding and market jitters remains if the BoJ surprises markets this time, underscoring the importance of a well-telegraphed and measured policy move [3].
CONCLUSION
The Japanese Yen's strength is driven by market expectations of a hawkish Bank of Japan rate hike, with technical and analyst commentary pointing to further appreciation if these expectations persist. While the BoJ board signals caution and flexibility, the risk of market volatility remains high if policy surprises occur. Overall, the Yen's firm performance and bearish bias in JPY crosses reflect significant anticipation and uncertainty ahead of the BoJ's upcoming decision.