Brown Brothers Harriman’s (BBH) Elias Haddad reports that USD/JPY briefly fell about five big figures to 158.00 on suspected Japanese intervention before rebounding near 161.00 and then dropping again. The Bank of Japan (BoJ) kept its policy rate at 1.00% with a hawkish bias and upgraded its risk assessment, while swaps now price higher odds of a September BoJ hike, supporting the Japanese Yen (JPY) outlook.

Hawkish BoJ repricing favors Yen

"USD/JPY dropped yesterday as much as 5 big figures to a low of 158.00 on possible FX intervention. USD/JPY recovered to near 161.00 ahead of today’s Bank of Japan (BoJ) policy decision before an intervention-like kneejerk drop to 158.55 later in the session."

"Japan’s Ministry of Finance (MoF) released its July report on Foreign Exchange Intervention Operations today. The report is for the period from June 29 through July 29."

"BoJ delivered a hawkish hold. As was widely expected, the BoJ kept policy rate at 1.00% and stuck to its hawkish bias stressing it “will continue to raise the policy interest rate.”"

"The BoJ has delivered just 50bps of tightening since December 2025 but its updated Outlook Report points to a faster normalization path toward the middle of its estimated 1.10%-2.50% neutral range."

"Bottom line: there is room for a hawkish BoJ repricing in favor of JPY. The swaps curve already raised the implied odds of a September BoJ hike to roughly 40% from 20%."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)