Without BOJ Rate Hikes, Yen Appreciation Will Likely Falter

Dow Jones
08/06

0122 GMT - Japan-U.S. intervention and hawkish noises from BOJ Gov. Ueda pushed the dollar-yen rate to Fitch Ratings' end-2026 forecast of 156. But entrenched reflation means that rate hikes are likely necessary to support further yen appreciation, Fitch analysts say. Finance officials from both sides signaled readiness to intervene further if needed but the yen remains historically weak against the dollar and a broader basket of currencies. The BOJ has said it will keep tightening, with Ueda flagging September as a possible window. Fitch expects the BOJ to wait until October and then to hike more quickly than markets anticipate. That should support the yen, but a return to 2019 levels is unlikely. Any perception that the BOJ is falling behind will likely trigger renewed weakness.

 

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