Japanese Yen: Fed hawkishness offsets BoJ talk – ING

ING’s Chris Turner notes that USD/JPY is slightly lower after BoJ hawk Hajime Takata signalled the possibility of a 50bp September hike or back-to-back moves. However, with Takata still in the minority on the policy board, ING expects the BoJ to pause after any September hike, while a hawkish Fed could keep USD/JPY trading around the 160–162 area for longer.

BoJ hawks versus Fed stance

"USD/JPY is a little lower in early Europe as one of the Bank of Japan hawks, Hajime Takata, has implied that the BoJ could possibly hike 50bp in September or deliver back-to-back hikes, meaning a further hike in October."

"Takata has been in the minority as one of the three hawks on the BoJ policy board and his comments should not be particularly surprising. He is a fan of getting the policy rate to neutral at 2.00% quite quickly."

"However, a BoJ hike in September would already represent a quickening in the pace of hikes after the tightening in June. And we suspect that after a September hike, the BoJ will prefer to wait until early next year before tightening again to see how weak domestic consumption has performed."

"For USD/JPY, the hawkish Fed is a game-changer and suggests USD/JPY can spend much more time in this 160/162 area."

"Scott Bessent will not be particularly happy with the hawkish Fed working against the yen buying operation, but he will no doubt appreciate the benefits of Fed independence here."