The Japanese yen strengthened against the U.S. dollar following reports that Bank of Japan officials believe there remains a possibility for an interest rate increase this year, despite ongoing domestic political instability.

USD/JPY declined 0.6% to 146.60, after trading around 147.30 prior to the report's release.

Currency markets are now pricing in a 13 basis point rate hike by year-end, up from the 11 basis point expectation as of Monday.