Citi Research expects the Bank of Japan to raise its key policy interest rate to 1.25% at its upcoming meeting, with market attention focused on whether Policy Board members Toichiro Asada and Ayano Sato cast dissenting votes. Asada, an appointee aligned with Prime Minister Sanae Takaichi's reflationary agenda, voted against a rate hike at the June meeting, where resistance to lifting rates to 1% was also expressed. Sato, another Takaichi appointee, is under scrutiny for potential dissent. A unanimous decision to raise rates could indicate that the Takaichi administration is responding to pressure from U.S. Treasury Secretary Scott Bessent, who called for normalization of Japanese monetary policy after joint currency interventions by Washington and Tokyo.
Citi says near-term moves in the dollar-yen pair depend heavily on the Federal Reserve's decision next week and the resilience of U.S. equity markets. If dissenting votes occur or the Fed surprises with a rate hike, the dollar could move back toward 155 yen. If stock markets respond positively while the Fed holds rates steady, the pair may remain supported above the 150 level. Ongoing downward momentum could also push the greenback temporarily toward 152 yen. As of Sept. 8, 2026, USD/JPY was quoted at 154.52, up 0.10, or 0.06%.
In the longer term, Citi anticipates a gradual narrowing of interest-rate differentials between the United States and Japan. That process, the bank says, could spur a broader unwinding of yen carry trades and establish a downward trend for the dollar against the yen. The BOJ's Summary of Opinions is scheduled for release on Oct. 1, 2026.
