The yen held steady near 159 per dollar as fresh data showed Japan’s inflation accelerating for a second straight month, strengthening the case for a near-term Bank of Japan rate hike.
USD/JPY was little changed around 159 after a volatile stretch earlier in the week, with the pair still well off the multi-decade highs above 163.5 it touched in late July before a coordinated US-Japan intervention pulled it back sharply. Over the past month the yen has strengthened roughly 2.6%, though it remains down more than 8% over the past year.
The latest inflation data showed Japanese consumer prices accelerating for a second consecutive month, a reading that adds concrete support to market speculation the Bank of Japan could move on rates as soon as its September or October meeting. Persistent yen weakness has been a contributor to imported inflation, giving policymakers an additional reason to consider tightening beyond the currency stability argument alone.
The pair’s current stability marks a contrast to the sharp swings seen in the immediate aftermath of the intervention, suggesting the market is now digesting a more balanced set of forces — intervention-driven yen support on one side, and interest rate differentials with the US still favoring dollar strength on the other. How the BOJ ultimately responds to the inflation data is likely to be the next major catalyst for the pair.
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