08.09.202600:11:16UTC+00Yen Surges to 7-Month High

The Japanese yen strengthened beyond 154 per dollar on Tuesday, its firmest level since February, reversing the bearish momentum that had driven the currency to a 40-year low in July. The rally has been fueled by the unwinding of carry trades, expectations of capital repatriation, and mounting political pressure from the United States for Japan to bolster the yen through tighter monetary policy.

Financial markets now anticipate that the Bank of Japan will raise interest rates this month. An economic adviser to Prime Minister Sanae Takaichi indicated that the central bank is likely to hike rates in September and deliver another increase by January next year. These comments underscore a growing acknowledgment within the Takaichi administration—previously inclined toward a more dovish stance—that additional BOJ tightening may be required to counter excessive yen weakness.

At the same time, new data showed that Japanese wages are rising at their fastest pace since 1997, reinforcing expectations that the BOJ will adopt a more hawkish policy stance.