The yen strengthened further against the dollar on Tuesday, with USD/JPY dropping 0.8% to 153.18 by 02:50 GMT after touching 152.87 — its lowest level since Feb. 18. The pair fell 1.2% the previous session and has shed nearly 4% from around 160 yen at the start of last week.
Investors are pricing in a near-fully expected 25-basis-point interest-rate increase by the Bank of Japan, which meets Sept. 17-18. The shift toward tighter monetary policy expectations was reinforced by an upward revision to Japan's second-quarter GDP growth to an annualized 1.4%, up from the initial 1.1% estimate, and a 2.4% rise in real wages in July. Business spending also declined less than previously reported.
Takuji Aida, economic adviser to Prime Minister Sanae Takaichi, forecast a September rate hike and anticipated further increases thereafter.
On the policy front, Japanese Finance Minister Satsuki Katayama said on Tuesday that Tokyo would seek to maintain orderly foreign-exchange markets. She said Japan and the U.S. remain aligned on currency policy and have maintained close communication, a stance unchanged following their coordinated intervention in July and her recent discussions with U.S. Treasury Secretary Scott Bessent.
The yen's advance was additionally supported by expectations that Japanese investors will repatriate overseas funds and that the yen-funded carry trade will continue to unwind.
Broader market conditions also provided tailwinds. Brent crude held above $97 a barrel amid heightened risk from Iran threatening retaliation against U.S. energy interests in the Gulf, adding to inflation pressures just ahead of upcoming U.S. consumer-price data due later in the week.
