{"id":437676,"date":"2026-09-08T12:17:29","date_gmt":"2026-09-08T05:17:29","guid":{"rendered":"https:\/\/www.swingfish.trade\/blog\/market-news\/a-boj-rate-hike-is-coming-but-can-the-japanese-yen-hold-its-gains-437676\/"},"modified":"2026-09-08T12:17:29","modified_gmt":"2026-09-08T05:17:29","slug":"a-boj-rate-hike-is-coming-but-can-the-japanese-yen-hold-its-gains","status":"publish","type":"post","link":"https:\/\/www.swingfish.trade\/blog\/market-news\/a-boj-rate-hike-is-coming-but-can-the-japanese-yen-hold-its-gains-437676\/","title":{"rendered":"A BOJ rate hike is coming, but can the Japanese yen hold its gains?"},"content":{"rendered":"
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With the Japanese yen on the move this week, there is a lot of focus and talk on the BOJ ahead of their next monetary policy decision next week.<\/p>\n

Expectations for another rate hike are rising sharply before their meeting on 17-18 September, with markets now assigning a ~79% probability to a 25 bps rate hike. That is not all too much changed from the end of last week though, with the odds of that sitting at ~75%.<\/p>\n

And yet, we are seeing the Japanese yen produce a strong rally this week in breaking key defensive lines in USD\/JPY on the way down. The question now is, can the currency hold gains through the central bank decision and after?<\/p>\n

BOJ policymakers set the tone<\/p>\n

The governor of the Japanese central bank has already opened the door for a move in September, in saying that\u00a0policymakers will assess whether inflation and economic developments are evolving in line with their forecasts. Meanwhile, you have the likes of board member\u00a0Hajime Takata being even more explicit in arguing for more timely rate hikes here<\/a>.<\/p>\n

As mentioned last week, it is interesting to see how the conversation has shifted in the central bank over the past month or so. In particular, after the joint intervention by the US and Japan to defend the yen currency.<\/p>\n

“Before all this, it was still the usual careful and more curated approach in trying to leave all options on the table. It was a case of always saying that “we cannot confirm nor deny” whether we will raise interest rates.\u00a0Now after the joint intervention it’s no longer about if we are going to raise interest rates. But suddenly, it’s about needing to do more perhaps and not just stick to their previous convention.”<\/p><\/blockquote>\n

How much further can the yen rally from here?<\/p>\n

This is where things become a little bit more complicated.<\/p>\n

A September rate hike is rapidly becoming the consensus rather than a potential surprise. With expectations already heavily reflected in the rates market and the Japanese yen currency, a simple rate hike decision may produce the classic buy the rumour, sell the fact response.<\/p>\n

In this instance, I would argue that what matters more will be what Ueda says about the next rate hike.<\/p>\n

If Ueda sticks to his previous communique in saying that\u00a0future moves will remain slow and data-dependent, that won’t breathe much confidence into thinking that they will be stepping up the pace going into next year.<\/p>\n

As things stand, traders are pricing in another 25 bps rate hike for January next year with ~61% odds of that even coming in December this year. And by June next year, traders are pricing in ~81 bps of rate hikes – including the one next week.<\/p>\n

So instead of one rate hike every six months, traders are anticipating the BOJ to move at least three times between now and the middle of next year.<\/p>\n

While a September hike would reinforce the BOJ’s policy normalisation story, the decision itself may not be enough to sustain another leg higher in the Japanese yen. In the case of USD\/JPY, the bigger and more crucial trigger would be whether the BOJ convinces markets that moving to 1.25% next week is another step in a continuing hiking cycle, or simply the next cautious pause point.<\/p>\n

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The technical perspective<\/p>\n

USD\/JPY has already moved down significantly since last week, dropping from 160.00 to near 153.00 now. In taking out key technical support levels, all eyes are on the January and February lows closer to 152.00-25 next. That will be the key line in the sand to watch out for in chasing a further downside move towards the 150.00 mark.<\/p>\n

As for dip buyers, they will have to make a push back above 155.00 to try and regain any semblance of technical control before looking to revisit more upside potential.<\/p>\n

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This article was written by Justin Low at investinglive.com.<\/p><\/div>\n","protected":false},"excerpt":{"rendered":"

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