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Yen recovery hinges on a more aggressive BoJ rate hike path

USD/JPY is around 159 after retracing nearly 40% of its post-intervention decline from about 164 to 155.5.

Reported · Written up by our desk · Major Pairs

OCBC analysts Sim Moh Siong and Christopher Wong said Japan’s FX intervention, supported by the United States, has not fully reversed yen weakness, with USD/JPY near 159 after giving back a large share of the move.

They noted the pair has retraced almost 40% of its drop from the pre-intervention high around 164 to the post-intervention low near 155.5, and they kept an end-2026 USD/JPY forecast of 163.

The analysts argued a more aggressive Bank of Japan tightening path, along with domestic capital flows back into Japanese assets, could support a more sustained yen recovery. They also said renewed intervention expectations have helped stabilize long-end Japanese government bond yields.

OCBC added that if a steadier yen reduces pressure for the BoJ to raise rates, yen and long-end JGB yields could face renewed upward pressure. The piece cited markets pricing about a 60% probability of a September hike.

Latest closeUSD/JPY 159.27 ▲0.5%

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