FX.co ★ Yen Holds Rally on Hawkish BOJ Bets

The Japanese yen hovered around 156 per dollar on Monday after gaining more than 2% last week, supported by growing expectations that the Bank of Japan will raise interest rates this month. Takuji Aida, an economic adviser to Prime Minister Sanae Takaichi, said the central bank is likely to hike rates in September and implement another increase by January next year.

His remarks signal a broader acknowledgment within the Takaichi administration—previously known for its dovish stance—that additional BOJ tightening may be necessary to curb excessive yen weakness. The currency was also buoyed by the unwinding of carry trades, expectations of capital repatriation, and mounting political pressure from the United States.

Meanwhile, data showed that Japan’s foreign exchange reserves fell by a record $79.6 billion in August, following Tokyo’s largest-ever yen-buying intervention. Authorities spent about $99 billion between July 30 and August 26 in an effort to counter persistent downward pressure on the currency.