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USD/JPY holds near 159 as BoJ rate-hike odds rise

Japan’s CPI climbed to 2.0% year over year in July and core CPI rose to 1.8%, helping lift expectations for a Bank of Japan hike in September.

Reported · Written up by our desk · Major Pairs

USD/JPY was steady near 159.05 in early Asian trading, as speculation about a potential Bank of Japan rate increase next month helped offset weaker US GDP data, according to FXStreet.

The Japanese data showed inflation gaining momentum, with the National CPI rising to 2.0% year over year in July from 1.6% in June, and core CPI up 1.8% year over year from 1.6%. FXStreet noted that stronger price pressure could strengthen the case for a BOJ hike.

FXStreet also pointed to additional risks for yen demand from crude oil, citing a view that renewed Middle East tensions could raise oil prices and add to Japan’s price pressures, with expectations for a September rate move. Overnight index swaps were described as pricing in about an 80.0% chance of a BoJ rate hike at the next meeting, citing Reuters.

Technically, FXStreet said USD/JPY remains capped for now, with spot holding below the 100-day simple moving average and positioning that suggests a bearish near term bias despite stabilization. The outlet also linked sentiment to Japan’s reliance on Middle East oil and broader expectations around BoJ policy normalization.

Latest closeWTI crude $82.40 ▲1.4%|USD/JPY 159.31 ▼0.1%

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