Price Action:
- USD/JPY broke above its 200-day moving average (148.51) and is currently holding gains, according to BBH FX analysts.
Bank of Japan (BOJ) Policy Outlook:
- BOJ Minutes (July 30–31):
- Two members expressed support for resuming rate hikes.
- One member warned the BOJ should not be overly cautious and risk missing the chance to raise rates.
- Another member suggested the BOJ could exit its wait-and-see stance possibly by end of 2025.
- Market Expectations:
- Swaps market prices in a 54% probability of a 25bps rate hike (to 0.75%) at the October 30 BOJ meeting.
- BBH expects the BOJ to begin normalizing rates in October.
Economic Data:
- Tankan business survey indicates:
- Continued real GDP growth recovery
- Progress in underlying inflation toward the BOJ’s 2% target
BBH Outlook:
- USD/JPY is expected to stay below 150.00.
- Despite the rise, the pair is trading above levels justified by US-Japan 2-year bond yield spreads, suggesting limited upside.