Japanese Yen Weakens Amid BOJ Rate Uncertainty, US Fed Rate Cut Expectations

The Japanese yen has traded in a narrow range recently as investors weigh the Bank of Japan's (BoJ) monetary policy outlook, with the July meeting minutes indicating a consensus for further interest rate hikes despite uncertainty from US tariffs. Some BoJ members, however, prefer to maintain the current accommodative stance due to doubts about the economic projections. The yen's decline, including a notable 4.5% drop against the dollar, has prompted Japanese investors to shift from foreign stocks to foreign bonds, seeking higher yields amid currency weakness. Market sentiment is also influenced by expectations that the BoJ will raise rates by year-end, while the US Federal Reserve is increasingly seen as likely to cut rates in September, which limits a strong US dollar recovery against the yen. Positive risk sentiment has further weakened the safe-haven yen, though downside potential appears limited as the USD/JPY pair finds support. Investors are awaiting upcoming Japanese economic data, including second-quarter GDP and producer price indices, for further guidance on the currency's direction.